The Fed Has Failed: Money Printing Can’t Create Actual Jobs




Deception at the Fed

by Ron Paul

For the past three decades, the Federal Reserve has been given a dual mandate: keeping prices stable and maximizing employment. This policy relies not only on the fatal conceit of believing in the wisdom of supposed experts, but also on numerical chicanery.

Rather than understanding inflation in the classical sense as a monetary phenomenon– an increase in the money supply- it has been redefined as an increase in the Consumer Price Index (CPI). The CPI is calculated based on a weighted basket of goods which is constantly fluctuating, allowing for manipulation of the index to keep inflation expectations low. Employment figures are much the same, relying on survey data, seasonal adjustments, and birth/death models, while the major focus remains on the unemployment rate. Of course, the unemployment rate can fall as discouraged workers drop out of the labor market altogether, leading to the phenomenon of a falling unemployment rate with no job growth.

In terms of keeping stable prices, the Fed has failed miserably. According to the government’s own CPI calculators, it takes $2.65 today to purchase what cost one dollar in 1980. And since its creation in 1913, the Federal Reserve has presided over a 98% decline in the dollar’s purchasing power. The average American family sees the price of milk, eggs, and meat increasing, while packaged household goods decrease in size rather than price.

Loose fiscal policy has failed to create jobs also. Consider that we had a $700 billion TARP program, nearly $1 trillion in stimulus spending, a government takeover of General Motors, and hundreds of billions of dollars of guarantees to Fannie Mae, Freddie Mac, HUD, FDIC, etc. On top of those programs the Federal Reserve has provided over $4 trillion worth of assistance over the past few years through its credit facilities, purchases of mortgage-backed securities, and now its second round of quantitative easing. Yet even after all these trillions of dollars of spending and bailouts, total nonfarm payroll employment is still seven million jobs lower than it was before this crisis began.

In this same period of time, the total U.S. population has increased by nine million people. We would expect that roughly four million of these people should have been employed, so we are really dealing with eleven million fewer employed people than would otherwise be expected.

It should not be surprising that monetary policy is ineffective at creating actual jobs. It is the effects of monetary policy itself that cause the boom and bust of the business cycle that leads to swings in the unemployment rate. By lowering interest rates through its loose monetary policy, the Fed spurs investment in long-term projects that would not be profitable at market-determined interest rates. Everything seems to go well for awhile until businesses realize that they cannot sell their newly-built houses, their inventories of iron ore, or their new cars. Until these resources are redirected, often with great economic pain for all involved, true economic recovery cannot begin.

Over $4 trillion in bailout facilities and outright debt monetization, combined with interest rates near zero for over two years, have not and will not contribute to increased employment. What is needed is liquidation of debt and malinvested resources. Pumping money into the same sectors that have just crashed merely prolongs the crisis. Until we learn the lesson that jobs are produced through real savings and investment and not through the creation of new money, we are doomed to repeat this boom and bust cycle.

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53 Comments:

  1. wow this is so nice that Everything seems to go well for awhile until businesses realize that they cannot sell their newly-built houses, their inventories of iron ore, or their new cars......

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  2. You're right

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  3. RON PAUL FOR PRESiDENT! END THE FED RESERVE... oh wait... the contract happens to end on DEC. 21st, 2012 ...

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  4. RON PAUL FOR PRESiDENT! END THE FED RESERVE... oh wait... the contract happens to end on DEC. 21st, 2012 ...

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  5. The fact of the matter: I'm not sure the American populace has the moxie to vote for someone who tells the truth. I think they want the 'showman' who spins the yarn, all the while the populace seemingly laps it up. Republicans and Democrats are engaged in the destruction of the middle class by printing trillions, which punishes savers, while rewarding those willing to go into debt. I'm not sure the American populace has the critical thinking skills to make thoughtful decisions.

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  6. The fact of the matter: I’m not sure the American populace has the moxie to vote for someone who tells the truth. I think they want the ‘showman’ who spins the yarn, all the while the populace seemingly laps it up. Republicans and Democrats are engaged in the destruction of the middle class by printing trillions, which punishes savers, while rewarding those willing to go into debt. I’m not sure the American populace has the critical thinking skills to make thoughtful decisions.

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  7. New Ron Paul Chant

    With the onset of the 2012 Primary election cycle about to begin, we Ron Paul Supporters need to squelch our opposition.

    I propose spreading the message of a new Ron Paul Chant. Currently, we chant Ron Paul! Ron Paul! Ron Paul! Ron Paul! Ron Paul! Over and over again.

    In CPAC 2011, our opposition began chanting USA! USA! USA! USA! USA! USA! In order to counter-chant us. This basic counter-chant insinuates (or better still, further insinuates) that Ron Paul and Ron Paul supporters are Anti-American.

    We need to either steal the counter-chant (USA!) thereby leaving our opposition to think of something else to counter-chant us and at the same time bring the cognitive association that Ron Paul and Ron Paul supports are more American than those who oppose us, or we need to use another chant. An alternative chant could be Ron Paul, USA! Ron Paul, USA! Ron Paul, USA! Ron Paul, USA! Ron Paul, USA! Ron Paul, USA!

    So Ron Paul supporters, how about it? What are your thoughts? Use USA! Chant or Ron Paul, USA! Chant?

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  8. A\ a pessimist
    B\ someone clicked it by mistake
    C\ a person who disagrees with Ron Paul
    D\ for the heck of it

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  9. A\ a pessimist
    B\ someone clicked it by mistake
    C\ a person who disagrees with Ron Paul
    D\ for the heck of it

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  10. I can't lose hope of a good president in the US. It IS the end times, but only God knows what will happen. The corruption is so far out that even genuine leaders will not be displayed or shown to the public because big government controls what you eat, see, hear and take when you are sick.

    The bible says: "Because the root of all evil is the love of money". This is so true.

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  11. I can't lose hope of a good president in the US. It IS the end times, but only God knows what will happen. The corruption is so far out that even genuine leaders will not be displayed or shown to the public because big government controls what you eat, see, hear and take when you are sick.

    The bible says: "Because the root of all evil is the love of money". This is so true.

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  12. Ron Paul's Full Speech at CPAC 2011: The Brushfires of Freedom Are Burning!

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  13. A voice of sanity :) Go Ron Paul!

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