Tuesday, May 10, 2016

Inflation: Violation of Constitutional Law

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.... I believe that banking institutions are more dangerous to our liberties than standing armies.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." - Thomas Jefferson


Ever since the establishment of thr Federal Reserve in 1913, the US dollar has lost over 95% of its value or purchasing power. We all know that 100 years ago you could go to any restaurant and buy lunch with a quarter.  Drinks and sides were each a nickle and simple main courses were a dime. Dollar menus and fast food aside.  A good meal today will cost at least about $10. Over the last 100 years, we have seen a substantial decrease in the value of the dollar. But I suppose no one cares as long as wages keep pace with prices. 

But people did notice in 2008 when there was a massive deflationary correction in the housing market.  Inflated houses that were selling for $600,000 in Florida and Nevada in 2008 were only worth $400,000 in 2009.  That means that if you had taken out a mortgage for $600,000 in 2008 and purchased a home, you could only sell that home for $400,000 in 2009, yet you were still on the hook to pay the remaining $200,000. This was what was referred to as being "underwater", and is why so many people (not just subprime loans) defaulted and many people declared bankrupcy.

However, my point here is that according the US Constitution, Article 1, Section 8, the Federal Congress is to have the duty and responsibility to "coin money" and "regulate the value thereof".  Allowing the inflation over that last 100 years and the deflationary crisis in 2009 is a violation by Congress of Constitutional law. 

Instead of performing its explicit enumerated constitutional duties, the US Congress is responsible for giving over control of money printing and regulating the value of US currency to the Private Federal Reserve Bank which implemented the Basel 2 Accords in 2008 which triggered the housing crisis and who are guilty for the passing of laws that establish the rules for bank lending (HUD Amortized Mortgage and Subprime Loans) which I believe have been the main drivers of inflation in our economy over the last 100 years.  

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