Rand Paul Rips Federal Reserve, Says Shrinking Dollar Hurts Poor

Rand Paul criticized Bernie Sanders for his “free college” plan Wednesday, pointing out that the money had to come from somewhere and predicting it would be from either taxpayers or the Federal Reserve.  Paul then pivoted to criticize the Fed’s monetary policy, saying that the falling value of the dollar and rising prices hurt the poor more than anyone else.  His full comments are below (starts around 1:10):

Somebody’s got to pay. The education will not be free. The professors will be paid; the buildings will be built; there’ll be electricity; there’ll be heat. There is an expense. Somebody will pay for the education. Maybe it’s going to be a plumber or a carpenter; somebody who didn’t go to college. Probably will be. Or maybe it’s going to be a couple that doesn’t have kids. Or maybe you are going to pay for it.

Well, ‘no, no, Bernie says it’s going to be free.’

Well, maybe we print up money. We have a Federal Reserve, and we print up money, and we give everybody money so they can pay for education.

Well, what happens? The value of the dollar then shrinks. In fact, over the last hundred years, 96 percent of the value of the dollar’s gone. So what happens when the value of the dollar shrinks? Your prices go up. So if gas costs more and food costs more, who do you think gets hurt the worst: the rich or the poor? The poor!

Nick Arnold is a researcher for the American Principles Project. Continue Reading

The GOP’s Best Shot in 2016? It Could Be This…

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FiveThirtyEight has put together a fantastic summary of how each issue should impact the 2016 campaign. Check it out here.

On economics, Ben Casselman writes:

Americans remain uneasy about the economy, even if they have become more sanguine in recent years. In a recent Wall Street Journal poll, just 47 percent of Democrats — and only 4 percent of Republicans — reported being “cautiously optimistic” about the economy. That dissatisfaction is driven by a harsh reality: Six-plus years after the recession officially ended, there has been no meaningful recovery in household income.

Republicans clearly see an opening. At last month’s CNBC debate, which focused on economic issues, candidate after candidate blamed Obama and the Democrats for stagnant wages, persistent inequality and lackluster economic growth. Marco Rubio said the American dream is “slipping away.” John Kasich promised to “get this economy moving again.” And Bush, who has based his campaign in part on a pledge to return the country to 4 percent annual growth, asked viewers to “imagine a country where people are lifted out of poverty again.”

But Republicans face their own delicate dance. The middle class didn’t exactly thrive under the last Republican president; median household income rose sharply in the 1990s but was stagnant in the 2000s, when George W. Bush was in office.

Republicans are finally starting to get it on economics and monetary policy. Ted Cruz has openly discussed tying our currency to gold, and others have followed suit Continue Reading

Don’t Look Now, But Monetary Policy Just Became a Top Issue in the GOP Primary

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It’s greatly encouraging to see the GOP candidates focus more on one of the largest economic problems facing the United States: the Federal Reserve and monetary policy. On Tuesday night, we witnessed the GOP field address monetary reform as a key to economic fairness and growth in a bigger and more substantial way than ever before. Candidates centered their comments on the problems created by the Federal Reserve’s artificially low interest rates and how it has adversely affected equitable prosperity through rising prices and stagnant wages for working families.

The Federal Reserve’s zero interest rate policy repeatedly came under fire at the Fox Business GOP debate, and several candidates chimed in on the issue substantively:

Rand Paul: “I think the Federal Reserve has made [income inequality] worse. By artificially keeping interest rates below the market rate, average ordinary citizens have a tough time earning interest, have a tough time making money. They’re actually talking now about negative interest. The money as it’s created through quantitative easing or other means tends to start out in the big banks in New York. And because we’re now paying interest for them to keep the money there, much of that money has not filtered out into the economy. So what we’re finding is there is increasing income disparity and income inequality.

“We also find that as the Federal Reserve destroys the value of the currency, what you’re finding is that, if you’re poor, if you make $20,000 a year and you have three or four kids, and you’re trying to get by, as your prices rise or as the value of the dollar shrinks, these are the people that are hurt the worst. Continue Reading

Incomes Decline Again, But Will GOP Candidates Speak Out?

Last week, new data released by the U.S. Census Bureau showed inflation-adjusted median income slipping to $53,657 in 2014, a drop from the previous year and a 6.5 percent drop from 2007, the year before the Great Recession, when it was $57,300.

Source: Wikimedia Commons (CC BY-SA 3.0) Source: “Measuring Working Family Stress in Relation to the Cost of Living,” JEC.

The fall in real income is affecting millions of families across the United States. So why aren’t the GOP presidential candidates talking about it?

If Republicans want to appeal to voters when they discuss economics, they had better talk about what’s impacting everyone — stagnant wages and a rapidly rising cost of living.

Wage stagnation has been going on for decades, a global phenomenon dating back to when President Nixon first pulled us off the gold standard and empowered the unelected Federal Reserve to control our currency.

But the problem has been exacerbated in recent years by irresponsible policy. The Federal Reserve has held interest rates at nearly zero for almost seven years now, and the consequences of that policy have been dire for working families — wages are effectively dropping, while prices continue to go up year after year.

Not only are people earning fewer dollars, but the precious few dollars they do earn are worth even less.

Sure, the Federal Reserve’s zero interest rate policy has been wonderful for the stock market and for wealthy hedge fund managers, but it’s been awful for the rest of us as the gap between rich and poor only grows larger. Continue Reading

Hillary Abandons Income Inequality

Former Secretary of State Hillary Rodham Clinton (public domain photo via Department of Defense)

Had you tuned in to Hillary Clinton’s hour-long speech on economics yesterday in order to learn the specifics of how she intends to achieve “strong growth, fair growth and long-term growth,” you would be unsatisfied:

Throughout the campaign, I’m going to be talking about how we empower entrepreneurs with less red tape, easier access to capital, tax relief and simplification. I’ll also push for broader business tax reform to spur investment in America, closing those loopholes that reward companies for sending jobs and profits overseas.

See, she’s FOR small businesses and she’s going to TALK about that.  As for the actual policies by which she will achieve these goals, well that’s for another time.

But as a preview of how she understands the politics of economic issues, the speech was revealing.

First off, she has abandoned “income inequality” as her central theme and instead embraced in a bear hug the central concern of voters: the rising cost of living.  Time and again she came back to this:

Wages need to rise to keep pace with costs. . . Paychecks need to grow. . . The defining economic challenge of our time is clear: we must raise incomes for hard-working Americans so they can afford a middle class life.  We must drive strong and steady income growth that lifts up families and lifts up our country, and that will be my mission from the first day I am President to the last.

Continue Reading

It’s the Prices, Stupid!

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In May, U.S. producers reported their largest price increases in over two years, marking an end for the brief reprieve consumers have enjoyed since late last year.  Food and gas prices are spiking, according to CNBC:

Last month, gasoline prices surged 17 percent, the largest increase since August 2009. Food prices rose 0.8 percent in May, the biggest gain in just over a year, snapping five straight months of declines.

Bad news for anyone who eats or drives, but why are prices suddenly on an upward trend after an almost year-long downward slide?  The cause, apparently, is a strong dollar:

A sharp decline in crude oil prices since last year and a strong dollar have weighed on producer prices. While rising oil prices are easing some of the downward pressure on inflation, the upward trend in producer prices will be gradual because of the dollar’s strength.

“…because of the dollar’s strength.”  This hits the nail right on the head.  A strong national currency means that prices for everyday items will fall to lower levels, or at least rise more slowly.  This means lot to the working families whose wages haven’t kept up with rising costs in decades.  In the 2012 election, rising prices virtually tied with unemployment for the top concern on voters’ minds (38-37%).  This isn’t a big surprise, since their take home pay has dropped almost a quarter since 2008.  Voters next year are going to be looking for someone to address the rising cost of living, and the candidate who can tackle that problem with a strong monetary policy proposal could go far in 2016. Continue Reading

Steve Wynn: “Real inflation is much higher than they say it is”

The front page of the Drudge Report today links to an article reporting on an interview businessman Steve Wynn, founder and CEO of Wynn Resorts, gave to a local PBS station in Nevada.  In it, Wynn offers a more cogent and coherent analysis of the miserable state of the economy and its impact on working families than we have heard from any of the Republican presidential candidates to date.

Here’s an excerpt:

Well, the idea that America is in the midst of a great recovery is pure fiction. It’s a lie. It’s a jobless recovery,” Wynn said. “Because recoveries are marked by the level of real employment. And if you count the people who have left the work force, real unemployment is 15 to 20 percent.”

Not only is unemployment much higher than the “official” rate of 5.5 percent, but Wynn said the Consumer Price Index, used to measure inflation, is also rigged in such a way that it doesn’t accurately reflect what real Americans experience on a daily basis. According to the U.S. Bureau of Labor Statistics, the U.S. had -0.1 percent inflation for the 12 months ended in March 2015. Inflation doesn’t exist.

Wynn says that’s a sham.

“If you take real inflation, and you’ve got to count energy and food and all that stuff, real inflation is much higher than they say it is,” Wynn said. “My employees’ take home pay, in spite of the increases we give them, their paychecks are 90-cent paychecks, 90 cents on the dollar.

Continue Reading

Monetary Policy Shrinking Middle Class

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At a CPAC panel on Thursday, APP’s executive director Terry Schilling told GOP candidates to look to monetary policy to explain the average family’s shrinking paycheck:

“The demand for digital currency like Bitcoin is a symptom of a larger problem—failed monetary policy,” Schilling said. “People are looking for alternatives to the dollar because of decades of mismanaged monetary policy.”

“The combined phenomena of wage stagnation and rising prices have been occurring for decades, but the Federal Reserve has exacerbated the problem in recent years since the advent of their near-zero interest rate policy,” Schilling continued. “While this has been wonderful for the stock market, it has resulted in a shrinking middle class and a growing gap between the richest among us, who have done just fine over the past several years, and working families, who have not.

“The Federal Reserve needs to look out for working families, not just the wealthy. Continuing this reckless near-zero interest rate policy hurts more than it helps.” Continue Reading

Santorum Says Stagnant Wages the Problem

Former Pennsylvania Sen. Rick Santorum (photo credit: Gage Skidmore, CC BY-SA 2.0)

Breaking from libertarian orthodoxy, Sen. Rick Santorum endorsed a modest raise to $8.75 in the minimum wage over three years to show voters Republicans care about stagnant wages.

“I’m not for what Barack Obama wants to do,” he told the Missouri Republican Party’s Lincoln Days gathering, (raise the minimum wage to $10.10 an hour). “But, the idea that the Republican Party, at a time when median wages are stagnant, is opposing the minimum wage is stupid politics. . .Sometimes when someone is hurting, they want to know that one thing more than anything else. People don’t think we care.”

I think Santorum may need to divorce his positive message from a critique of the Republican Party, but focusing on how people are hurting because rising prices and stagnant wages are cutting into their paycheck is spot on.

Maggie Gallagher is editor of ThePulse2016.com. Continue Reading