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Saturday, November 10, 2007



I never thought I would take issue with Ron Paul, but watching Bernanke’s testimony before a House committee and Ron Paul’s grilling of Bernanke forces me to conclude that both men are wrong but for different reasons. I was one of the first to suggest that the Fed should decrease interest rates to counteract the sub-prime meltdown. This was months ago when ALL the so-called experts were suggesting rate hikes. But, finally when Bernanke did that very thing the dollar started to take another plunge downward. This was expected.

Ron Paul is concerned about the sinking dollar and criticizes Bernanke when he decreased interest rates. Where are they both wrong?

Let me take Bernanke first. The problem with the sub-prime market meltdown was that it was created because Bernanke decreased interest rates so rapidly that the market did not have a chance to respond and adjust. It would have been better if he started to decrease rates and been patient to wait for a market adjustment. Even President Bush who is a better economist than Bernanke, I might add, knows that the market takes a period of 8-16 months to adjust to changes. The Feds over the years, even with the master-of-double-talk Greenspan, has always been behind the curve.

Relief for the sub-prime debacle is going slowly, if it is happening at all, because in my opinion the adjustment of the interest rates downward occurred too late in the cycle. It should have been done when the meltdown was first noticed to have had a salutary effect. But Bernanke is finally on the correct path.

Now Ron Paul is worried about the sinking dollar and is criticizing Bernanke for causing the dollar to go down further because of decreasing the interest rates which will cause such an effect. I am criticizing Paul for his stance on this. Why should the American public not benefit from low interest rates? Low interest rates spurs investments and allows common individuals to own homes. The banks generally do not like low interest rates. They like interest rates to be high and they like even better the spread to be great between the rates at which they borrow money from the Fed and the rates they pay their depositors or the rates they charge people who borrow money from them.

Banks are prime predators in our society. I am afraid they always have been and always will be. I believe we need another Teddy Roosevelt to check the banks.

Let me share with my readers about a bank here in Panama – Banco Uno, to be specific. When I arrived here I sought out Banco Uno because they were paying a whopping 8% interest in some CD’s held for a period of 8 years and they were paying 10% on CD’s destined to be used for children’s higher education. How could they do this? It was because they were mainly a credit card bank who charged high interest rates to their cardholders and they passed on to their depositors some of their gains in the credit card division.

In November, 2006, Banco Uno was bought out by Citigroup. I dreaded that move. By the end of December the highest interest rates on CD’s dropped to 7%, by the end of January down to 6.5%, and finally by the end of March down to 5.5%. They are making the same profit in their credit card division but passing less of it on to their customers. THIS IS THE WAY US BANKS OPERATE!

The reason why the dollar is dropping is not the interest rates. It is the habit of the Fed to print more worthless paper money, not backed by any substantial asset such as gold, to increase what they call “liquidity.” And what is “liquidity?” It literally means “liquid!” And you guessed it, it is the watering down of money!

Although Ron Paul is also concerned about the printing of worthless paper money, he should be more concerned about it relative to interest rates. Concerning the economy, Ron Paul would make a more ideal president because he understands the economic issues and is not beholding to any special interest groups especially banks. I just wish he would change his mind about interest rates.

I promised two months ago I would not write any more on politics and economics and concentrate my efforts on health matters. I am sorry, but I just cannot help myself.

nicola michael c. Tauraso, M.D.
Director, Tauraso Medical Clinic
“Remember to check in on our ORDER ONLINE store, especially for our new EBOOKS series”



Anonymous Jerry H. said...

Two ways to inflate the currency:

1. Print money out of thin air. We easily recognize that if it were legal for individuals to print money whenever they needed it, everyone would quickly print themselves zillions and zillions fo bucks and very soon the money would have no value at all. It would be worthless. Same thing happens when the government prints money. It's a crime if we do it.

2. Issue credit. Create money out of thin air by issuing credit. Go to a bank and get them to change the dollar ballance in your checking/savings account by "loaning" you money - gotten from the fed out of thin air.

November 10, 2007 at 5:44 PM  

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