Blame the Fed for the Financial Crisis … The Fed fails to grasp that an interest rate is a price, the price of time. Attempting to manipulate that price is as destructive as any other government price control. To know what is wrong with the Federal Reserve, one must first understand the nature of money. Money is like any other good in our economy that emerges from the market to satisfy the needs and wants of consumers. Its particular usefulness is that it helps facilitate indirect exchange, making it easier for us to buy and sell goods because there is a common way of measuring their value. Money is not a government phenomenon, and it need not and should not be managed by government. When central banks like the Fed manage money they are engaging in price fixing, which leads not to prosperity but to disaster. The Federal Reserve has caused every single boom and bust that has occurred in this country since the bank's creation in 1913 – Congressman Ron Paul/ Wall Street Journal
Dominant Social Theme: The problem is the corporations … the money … the manipulations … Wall Street greed … Goldman Sachs … Obama … Bush … the wars … the corrupt peace … the tax system … the pollution … the global warming … the lack of potable water … starvation …
Free-Market Analysis: Congressman Ron Paul, the beautiful light of a new century, has written a wonderful article in the Wall Street Journal making the powerful point that central banks FIX the price of money. Perhaps we like the article so much because this is the analogy that we regularly use.
Editor's Note: In this article, we return to our theme that central banking is the MAIN problem that needs to be addressed in the modern world. Elsewhere in today's roster of posted stories from DB, a viewer may find a convincing article from the esteemed Lew Rockwell on how the state itself is the number one problem. Theoretically, this is perhaps true. (Who are we to argue with such a wise one?) Nonetheless, from our perspective the fastest way to disassemble an authoritarian state may be to deprive it of its funding. One could even make the argument that the push toward world government would never have come as far as it has were the state itself to rely on past (much blunter and more obvious) tools of enrichment such as conquest and rapine. The mechanism of Modern Power is the prime tool in the arsenal of the world conquering elite; it ought to be brought out into the open where the full gamut of its damage can be explored, assessed and hopefully counteracted.
Central banks, and especially the Fed, are run by good, gray men who determine the value and the price of money. They do it every minute of every hour of every day. There's only one problem … price fixing doesn't work. Never. Ever.
Congressman Ron Paul has done a great service by advancing this SIMPLE point on the national stage. Those responsible for central banking will in turn explain all the "good" things the Fed does. In fact, central banking is a weapon aimed by the Anglosphere power elite at the West's (and the world's) middle classes. There is no excuse for them. They ought to be abolished as quickly as possible. Here is more from Dr. Paul's article:
Adding new money increases the supply of money, making the price of money over time—the interest rate—lower than the market would make it. These lower interest rates affect the allocation of resources, causing capital to be malinvested throughout the economy. So certain projects and ventures that appear profitable when funded at artificially low interest rates are not in fact the best use of those resources.
Eventually, the economic boom created by the Fed's actions is found to be unsustainable, and the bust ensues as this malinvested capital manifests itself in a surplus of capital goods, inventory overhangs, etc. Until these misdirected resources are put to a more productive use—the uses the free market actually desires—the economy stagnates.
The great contribution of the Austrian school of economics to economic theory was in its description of this business cycle: the process of booms and busts, and their origins in monetary intervention by the government in cooperation with the banking system. Yet policy makers at the Federal Reserve still fail to understand the causes of our most recent financial
The continued existence of an organization that can create trillions of dollars out of thin air to purchase financial assets and prop up a fundamentally insolvent banking system is a black mark on an economy that professes to be free.
This is the genius of someone like Dr. Ron Paul. We could never have written this statement so clearly and concisely (though we try every day). The peculiar brilliance of Dr. Paul lies in his adamant insistence on pointing out the REAL problem of the modern world – its endless distortions of money – and his ability to put it into words that everyone can understand.
It is really very simple. The underlying problem of the Western world is that its "money stuff" is counterfeit. It is fake. It is phony. And a few good, gray men at the behest of the great central banking families and their enablers and associates can print as much of the stuff as they want to print whenever they want to print it.
This endlessly distorts the economy, leads to false euphorias which inevitably then lead to great busts. Over time these massive waves of currency overwhelm the economy entirely and no one knows whether enterprises are solvent or not. The link between economic activity and price information has been severed. Investment and economic growth in such a situation is almost impossible.
This is why there are so many banks in the world, in fact. In the US – throughout the Western world in fact – there is a plethora of banks and bank branches. This goes for the developing world as well. Almost every downtown of every major city around the world is crowded with bank skyscrapers.
These banking entities are not the REAL problem, of course. They are merely the distributors for CENTRAL BANKING. They are only additional EVIDENCES of the problem, which is central banking itself. Without money manipulation, as Murray Rothbard was fond of saying, economies would likely revert to gold (and silver) and people's savings would gently appreciate as technology drove down cost.
The great paraphernalia of the West's investment industry would not be needed anymore. States would have to become far more overt in how they obtained and utilized resources. The violence of it all would become far clearer, leading to substantively more honest conversations. This seems how it worked in days-gone-by.
The problem, initially – the ROOT of the modern problem – is 20th and now 21st century central banking. The Internet Reformation itself has allowed us to address the issue publicly and help bring other substantive issues surrounding its presence to light. One day we will learn to explain it as forcefully and eloquently as Dr. Ron Paul! We'll keep on trying …