USA Today "End the Fed"

Discussion in 'Economics' started by wildfirepow, Sep 22, 2009.

  1. "The Federal Reserve should be abolished," writes Ron Paul, "because it is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty."

    This is the thesis of Paul's End the Fed (Grand Central Publishing, $21.99, 224 pages), the Texas congressman's case against the Federal Reserve. The title was taken from a slogan that Paul heard chanted at various rallies and conventions, filling him with hope that monetary policy has become a subject worthy of popular protest.

    Many people consider the Fed an "indispensable institution," but few know what the central bank actually does. For example, the Fed "can create trillions of dollars and distribute them to its cronies without congressional oversight," writes Paul, a former GOP presidential candidate.

    Creating an endless supply of money is the worst offense of the Fed, an institution that Paul believes is the root of many of the nation's problems, including:

    •A monetary policy that benefits bankers, rather than the common man. The 1910 meeting where the idea for the Federal Reserve was drafted involved bankers and government officials working in secrecy on Jekyll Island off the Georgia coast.

    •Giving too-big-to-fail banks little reason to pursue efforts toward efficiency because the Fed is there to save them in a crisis.

    •Giving government a blank check with which to wage war. When governments have to finance wars without central bank cash infusions, they're forced to economize on resources and end the conflict as soon as possible. Instead, Paul argues, our government, backed by the Fed, is like "an irresponsible teenager with an unlimited line of credit."

    •Interfering with the ability of the free market to give accurate feedback to borrowers and lenders. Artificially low interest rates can distort signals that borrowers use to assess risk, which can lead to false confidence in the economy and excessive use of capital.

    •Creating "moral hazard" through market rescue of companies. The sense of responsibility for one's own actions is removed, conditioning business people to believe they can enjoy the rewards of the market, yet pass on the penalties to others.

    •Fueling inflation by increasing the money supply without regard to the pace of economic growth, thus debasing the currency in much the same way that counterfeiting steals value from every dollar.

    It's no surprise that Paul, the Libertarian standard bearer, should number among his intellectual influences two legends of the Austrian free-market school of economics, Ludwig von Mises, and Friedrich von Hayek, author of The Road to Serfdom, considered among the most influential books of the 20th century.

    In Paul's best-case scenario, the Fed would be dismantled. With its demise, he argues, rationality would be restored to monetary policy. With limits on the printing of money, inflation would halt, the dollar would keep its value, and banks and government would spend within their means. In short, the federal government would have to raise money as states do, and face the same balanced-budget constraints. Paul also envisions a return to the gold standard, which was abandoned in 1933, and Americans being able to trade in gold and silver bullion.

    The book includes transcripts of Paul's conversations with former Fed chairman Alan Greenspan and current occupant Ben Bernanke, which feel more like grandstanding than helpful additions to the book's argument.

    Still, Paul offers a cogent defense of his position. Readers may question his desire to return to a gold standard, but Paul makes a strong case for the importance of sound monetary policy. To Paul, the small steps we take toward a sound policy begin with curtailing the unchecked power of the Federal Reserve
  2. Daal


    The US had bubbles and recessions before 1913. Can someone inform Paul of this?
    Oh I forget, Greenspan already told him that in a Congress hearing years ago but it entered one ear and came out in the other

    It seems that he worships Murray Rothbard and Mises too much to a point where he cant possibly see how they could ever make a mistake
  3. Eight


    That thing in the future where we all end up slaves on a prison planet... I think that bothers people more about the CB's than some economic ups and downs...
  4. Fed is a sitting duck for criticism for the way they have handled monetary policy, particularly since the nascrash in 2000-2001.

    US has has two deep equity declines in less than ten years, exacerbated by Wall st. meddling and shorting, robbing IRAs and 401-K, etc.

    Nation is fed up and wants recompense, hence Ron Paul is getting traction on this. Blame Bernanke and Greenshits for not having the guts to do the right thing! They have brought this on the entity called the Fed singlehandedly.
  5. This is so clearly contradicted by actual history that it baffles me how it can get repeated so often.

    Non-fiat currencies do NOT have fewer bubbles, and they do NOT restrain governments to "spend within their means".
  6. moarla


    you have had central banks bevore 1913 also.... :confused:
  7. lrm21


    Paul is like a broken record.

    Take your vitamins, wear a rain coat.

    Everything he says is common sense.

    But the guy has no solutions. He is just a crackpot whiner.

    He is proud of being Dr. No, but what has he done?

    This idea that the FED is the root cause of all the problems in the world, is the other side of the kook coin, that all the problems of the world are Americas.

    - The government did not spend within in means before the FED
    - We had period of hyper inflation before the fed
    - We had periods of panics, deflation before the fed
    - we had crooked bankers, crooked politicians.

    So tired of the END the FED crap already

    deserves a

  8. Daal


    Heres Greenspan schooling Paul on a Congress hearing in 2001

    "Mr. GREENSPAN. so long as you have fiat currency, which is a statutory issue, a central bank properly functioning will endeavor to, in many cases, replicate what a gold standard would itself generate.

    If you take the period in the United States where the gold standard was functioning as close as you can get to its ideal, which would be from probably 1879 probably through the turn of the century, you had a number of business cycles in that period. And in many respects, they had very much the same characteristics that
    we just observed in the last couple of years: the euphoria that builds up when the outlook improves and people overextend themselves and the markets shut them down.

    Well, what shut down the market was the very significant rise in real, long-term interest rates in 1999, and in that regard, that is the way a gold standard would have worked. So I would submit to you that the presumption that if you have a hard currency regime, you will somehow alter human nature any more than a fiat
    currency one will, I will suggest that that does not happen."

    Paul didnt seem to mind counter evidence, he is from the school where gold works not just as currency but also as sleeping pill of some kind
  9. moarla


    ron paul has solutions, but you want hear them.
    Sobe happy with what you have and go your way :)
  10. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

    This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

    The Maestro.
    #10     Sep 22, 2009