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. Get rid of ALL "illegal" aliens!

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  2. Ron Paul - You are remarkable, Thanks for all your education and learning and telling this. Appreciate it !

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  3. What he stands for "is" who he is, cant say that for any of the others.

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  4. The elite will do everything in their power to discredit this hero. That means we the people have to work that much harder to elect RON PAUL PRESIDENT IN 2012

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  5. corporate lobbying should be criminal. Why is this not plain corruption???

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  6. If common sense prevailed and Ron got the Republican nomination, how would Obama campaign against him?

    How do you smear Ron Paul? Ron would want an issues based campaign so Obama is left with the fear campaign. Would hope triumph over fear?

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  7. I just shared this video sp my friends can know who run paul is

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  8. I hope the fall of the dollar and the middle east wakes, the US up! We cant keep buying up peoples greed.

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  9. run ron run

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  10. President Paul is the only hope for our nation.
    His faith that our freedom can restore our once greatness is immutable.
    His commitment to uphold our constitution is relentless.
    His quest for our financial liberty is tireless.
    His election is inevitable, for America's success.
    Tell a friend.

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  11. Ron Paul 2012.

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  12. Revolution!!

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  13. --
    The Government HAS NEVER EVER TOLD YOU THE TRUTH
    --

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  14. Just waiting on the word, Then its on!!!

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  15. Uprise, turn off the TV, turn on your mind, we have been taught that money=power, it does not have to be, humanity=power, take your power back! The fat cats have had enough!

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  16. GOOD JOB MR PRESIDENT.

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  17. man just based on this update, Trump needs to go crawl back to his diamond encrusted marble towers and pick his truffle filled navel, pondering his ignorance.

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  18. Please say it Mr. Paul: The "Federal" Reserve was BORNE as a criminal enterprise for the express purpose of stealing the nation's wealth! Please acknowledge that fact.

    The only reason it has not been exposed as such, is because the charade has succeeded for such an extraordinary length of time , the People assume it's legitimate; I'll bet the original criminal cartel never imagined they would get away with it for this length of time.

    Anyone who understands compound interest gets the Truth

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  19. This man should be our President

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  20. This is why Ron Paul is so potent not cause of who he is but what he stands for...he has the ability to inspire so many people and have them open there eyes to a tyrannical government that wants to surpress our rights. We are waking up, u hear me Obama we are waking up

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