QE2: The Fed’s Last Stand?

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The World Shorts the Dollar

by Ron Paul

A remarkable confluence of recent events has brought unprecedented but very welcome attention to both U.S. monetary policy and the global political economy in general.

First, Federal Reserve Board Chairman Ben Bernanke recently announced that the Fed would embark upon another round of monetary easing by purchasing $600 billion worth of U.S. Treasury debt. This amounts to an admission that markets have run out of patience with our profligacy, and therefore our own central bank literally must serve as the buyer of last resort for Treasury debt.

Second, World Bank president Robert Zoellick openly suggested that gold could play a helpful role in the global monetary system by serving as reference against more volatile fiat currencies. This is almost heresy coming from a neoconservative globalist like Mr. Zoellick. It hints at an obvious but unspoken truth that is anathema to politicians and central bankers alike: namely, that gold could be viewed as…. money!

Finally, Mr. Obama attended the G20 summit in South Korea last week and found a very chilly reception for his vision of American economic policy. Mr. Obama argued for continued worldwide stimulus, via continued debasing of the U.S. dollar, to bolster American exports. Several powerful European and Asian finance ministers, however, rejected this approach out of hand as nothing short of a currency war. They are committed to austerity measures at home, and don’t want to let the U.S. simply monetize its past sins at their expense.

All of these events culminated in a tremendous amount of political and media scrutiny aimed the Fed. Ordinary Americans are demanding answers and accountability, and they are putting heat on their political representatives in Washington to end the cozy “independence” from congressional oversight the Fed has enjoyed for so long.

In the 35 years I have been studying, speaking, and writing about monetary policy I have never before seen Congress or the financial press pay much attention to the Fed. Monetary policy has always been considered boring on Capitol Hill, something left to remote policy wonks far away from the din of presidential or congressional politics. Congress always has been eager to leave Fed governors well alone, with no oversight or accountability, as long as they played along and papered over the growing budget deficits.

But it’s amazing what a global economic meltdown will do to the political and media landscape. In just two short years, the Fed has become the hot topic and a lightning rod for criticism. While it is gratifying to see so many formerly uninterested politicians, economists, talk show hosts, and pundits suddenly rally to attack the Fed, one can only wonder whether they truly understand that central banking is inherently incompatible with our Constitution and a free market economy.

In other words, it’s not enough to show outrage at the latest Fed action or argue about the relative merits of Mr. Bernanke compared to his predecessors. To reclaim our dollar and our economy, Americans must oppose central banking per se. Fiat currencies cannot be “reformed” or “managed”. They are fundamentally subject to ruinous debasement courtesy of the political and economic ruling class. History shows that this is true in all nations at all times.


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85 responses to “QE2: The Fed’s Last Stand?”

  1. Mark

    The root of your writing while snnidoug agreeable at first, did not really settle well with me personally after some time. Somewhere throughout the sentences you actually managed to make me a believer unfortunately just for a short while. I however have a problem with your leaps in logic and one would do well to help fill in those breaks. If you actually can accomplish that, I will definitely be fascinated.

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  2. 411American

    The people accountable for this is UNIONS Starting at the top Govern-Mental Federal Union to work UNIONs turning us into a Soviet UNION as Americas freedom and Independence is locked up with UNIONS -Unions are accountable and irresponsible and the States prostituted their own natives and are now all on welfare. End the FED and the thief s will have to find something else to steal, Enact the order JFK was Existed over Executive order 11110- Come to and wake up America you under siege

    »crosslinked«

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  3. AndrewChan84

    This man never compromises! Not like your average Republican. It’s amazing how honesty, humility, principles, patience and wisdom come hand in hand.

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  4. ExposingUncleSham

    Exactly!

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  5. ExposingUncleSham

    I tend to side with Bill Still on a fixed money supply issued interest free that will appreciate in value. However you then have to trust men to not partake in fraud. Check out The Secret of Oz by Bill Still. I bet you will enjoy it very much.

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  6. ExposingUncleSham

    no they cannot print gold but unless you confiscate the illegally gained wealth of the super rich they can corner any commodity market and manipulate the supply in circulation. The mega banks have been manipulating gold n silver prices for a very long time.

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  7. Dfens

    Ron Paul keeps warning us of impending runaway inflation, while what we are experiencing is deflation. Rarely has anyone been so wrong and not been totally dismissed. As we listen to Ron’s rant’s, his protectionist buddies in Communist China continue to grow their economy in double digits and their economy will be bigger than ours in 2 years! Ron’s not just rearranging the deck chairs while the nation sinks, he’s actively pointing people the wrong way to be saved. A candidate may finally emerge that has the best interests of the US at heart:

    “When they talk about trade wars like it’s a horrible thing. China is taking such advantage. I have friends, I do a lot of business with China. They can’t believe what they [the Chinese] are getting away with. I don’t blame them, if they can get away with it” — CNBC

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    1. D

      The question is, are you in favor of abolishing the Federal Reserve? Why? Explain it briefly in a simple way and don’t throw off the many just by saying “A candidate may finally emerge that has the best interests of the US at heart: “. That is empty and has no meaning at all.

      There is a clear definition as to who the Democrats and Republicans are if you read history. Democrats expands the meaning of the constitution while the Republicans are those who said to follow those words strictly.

      Trade wars is a really horrible thing, most politicians are just empty promises and you just need to put all the events together to see the whole picture, not just here in the US but also in other countries.

      How can increasing in all prices be deflation?

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      1. Dfens

        China has a national bank. If you’re looking for someone to demonize, why not pick them instead of our own national bank? Obviously you love China and hate the US just like everyone else who posts here. Is there anyone here that’s not a shill for Communist China who would like to discuss the real issues here?

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        1. Dfens

          For decades, corporate America championed investing in China and trade with China, though the massive transfer of U.S. factories, technologies and jobs was clearly empowering China and weakening America.

          Now, with U.S. political, military, industrial and strategic decline vis a vis China manifest to the world, we hear the wails of American businessmen that they are not being treated fairly by the Chinese. And the politicians responsible for building up China are now talking tough about confronting and containing China.

          Sorry, but that cat cannot be walked back.

          Review commission chair Dan Slane says his members have concluded that “China is adopting a highly discriminatory policy of favoring domestic producers over foreign manufacturers. Under the guise of fostering ‘indigenous innovation’ … the government of China appears determined to exclude foreigners from bidding on government contracts at the central, provincial and local levels.”

          Imagine that! The Chinese are ignoring WTO rules and putting China first. Don’t they understand how the Global Economy works? You’re not supposed to tilt the field in favor of the home team.

          One knows not whether to laugh or cry. — Pat Buchanan

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        2. D

          Then why can’t we do the same, if our national bank is robbing us by devaluing the USD/spending power. If this continue, the only ones that can spend would be those who are rich. How is that going to stimulate the economy? Can you name a politician who can rectify this mess and if so, explain their possible policies as to what the outcomes would be stating both sides(bad and good – it seems like all they are putting out there are the good ones). Everything is increasing every time new policies are enacted, look on the news and the trends and asked yourself why did it happened. You’ll be able to traced it all the way to Federal Reserve’s activities.
          Have you heard about what the deficit committee is planning on doing?

          http://www.youtube.com/watch?v=XUH3oCsGrw4

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        3. D

          How and where did you come up with demonizing our national bank? If they are printing money out of thin air and devaluing the USD, isn’t that more evil- plain and simple robbing us of our money/fruits of our labor without realizing it. The reason why they(big corporations) all moved to China is because they want cheap labor and raw material to gain more money. If they had stayed here and if all of us just supported domestic products like what we should have been doing, then maybe just maybe, it wouldn’t have gotten this huge of a mess. You cannot correct a mistake with another mistake. You have to admit to it and start from scratch because patching up this bubble economy is just going to make it worst for the future. His proposal isn’t perfect as free market would have local problems but it wouldn’t be as big as global problem.
          We’ve bail out big corporations and what did they do, they put it in their pocket and got away with it. Liquidating those debts (start paying those trillions), negotiating an exit plan to this foreign trade policy and taking care of our own would be much better rather than taunting other countries with “hey we’re going to artificially lower(print more money/QE2) our currency to be competitive(bring back investors to our turf) to create jobs by printing more money(inflation)”. It is a messed up system because USD is currency reserve that affects other countries’ livelihood. If we just had a limited trade with other countries and be more pro-active of what we have then life would have been much better. More jobs locally, more economic activities, more working middle class etc… but instead, we have to be creative and do free trade that offsets the wealth around the world stirring up all this complexities. I’d rather have a short term problems locally rather than a long term confrontations with neighboring countries. Plain and simple, no unstable currency but just sound money. I’d say negotiate our way out and take care of our own for the future of our kids.

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