Ron Paul: Giving Free Money to Banks Does NOT Stimulate the Economy!

by Ron Paul

The Federal Reserve’s interest rate price-setting board, the FOMC, met last week. They will continue to set the federal funds rate at well below 1%, and plan to keep it low until the end of 2014. That’s a year and half longer than they planned when they met just last month. Chairman Bernanke says they are keeping interest rates so low for so long because the economic outlook warrants it.

The fallacies in their reasoning would be amusing if they weren’t so dangerous. The Fed wants to keep the price of money at essentially zero – in other words “free” – to boost the economy. But the boost they are attempting won’t get here for another three years. That’s not a recovery. And we’ve already tried this tactic. That’s how we got into this mess in the first place: with interest rates artificially low for a very long time. Free money doesn’t stimulate growth, as Japan’s two lost decades clearly show. Artificially low interest rates only serve to punish saving, distort market signals, and cause further malinvestment. They also do nothing to address the only real solution to our economic woes: liquidation of the bad debt that hangs around the neck of the world’s economy, preventing recovery. Artificially low interest rates merely ensure that we remain a debt-financed consumer economy guaranteed to end up with a weaker economy and higher prices.

What baffles me even more is that two decades after the collapse of Soviet planning and decades more since the U.S. and economists purportedly rejected the idea of price setting, we find nothing wrong with the Fed setting the price of money. We all agree it is a bad idea to have a board saying the price of wheat should be $250 a ton today, or carpenters wages should be $25 an hour until the end of 2014. But we are perfectly comfortable with having a board set the price of one half of every transaction in our economy. And our markets are supposedly free.

The Fed policies of low interest rates, Operation Twist, and rounds of quantitative easing are all attempts to keep the economy alive artificially. But the 12 FOMC participants cannot manage the economy any better than the bureaucrats of the Soviet Union. The policies haven’t worked. They won’t work. Real economic recovery cannot come until we liquidate the bad debt, until we eradicate the poor decisions we made over the last decade, and start with a sound foundation. It is time we acknowledge the truth of the Fed’s activities: they are merely using fancy words for price setting.

Treasury Secretary Andrew Mellon was correct in the 1920s when he said “liquidate everything.” That’s what we did in the severe depression of 1920-21, and we recovered so quickly it is never even talked about. We didn’t take his advice after the 1929 crash, and ended up with the Great Depression. We are committing the same mistakes, destined to live in this Great Recession for a decade or more—it has already been four years, the Fed says it will be at least three more! It’s time we start rethinking what the Fed’s policies are really doing to our economy, because obviously, by their own admission, they haven’t helped.

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84 Comments:

  1. The number of people who’s eyes glass over when you talk the realities of economics is dangerous to this country. I run into it every day in discussions. Most people haven’t even read the budget. The fact that we spend 2ice what we take in is meaningless to them.

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  2. where can i buy a money printer? In FED up with this shit, i’m sure ill cover the printer costs in no time. Can i get one on EBay?

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  3. I want to start a bank and get free money to

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  4. I want to build a dome home that would be powered by solar panels this is not new tech these houses have been proven to be disaster resistant energy efficient green housing. I have approval to build but BANKS will not lend for this type of home the home would pay for its self it is why they will not finance them. They want you to be financially irresponsible they believe this is how a economy is sustained but this is not true a good economy is predicated upon sound investment. Ron Paul 2012

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  5. The government is zionist run it needs a root and branch clear out all zionis supporters must be ousted the fed must be disolved and Isael must be seen as an enemy of the state for its attacks on USA soil the USS liberty 9-11 and all other mossad opperations wake up america they own you.

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  6. Vote for Ron Paul 2012 if you want real freedom

    Remember February 1st, Ron and Carol Paul 55th Wedding Anniversary Money Bomb.

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  7. NOTE Time is almost out to register to vote in New York, Ohio, Virginia and many other Super Tuesday (Mar 6) states and earlier states. Get registered if you haven’t yet! And make sure everyone who supports liberty is registered too! Time’s running out for registering to vote in those states that require it.

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  8. The media is owned by the same people who own the Fed, who are the same people that support Newt and Romney. What did you expect them to do .. shoot their own foot? Ron Paul is the bullet, but they own the pistol and it is time to create a new pistol for the people or take the one they have away.

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  9. We should all be exiting this corrupt paper system. We should be converting our capital into gold and silver. Ron Paul 2012

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  10. Free money for banks to loan it out to people on interest.

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  11. it appears people in this country will never learn thier lesson,when I say people im talking people over 50. they are problem,im talking my parents generation and above, now im getting up thier too at 35 ,but im still young enough to not get jaded and suckered in by globalist news like Fox or CNN.old ppl will not change,they believe everything they are told,by the damn tv.its up us under 50 ppl,to make changes ,.N have a revolution is need be,the old had thier chance ,they arent relevant anymore

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  12. I Trust…”Gold and silver” It will save your purchasing power, as the FED PRESSES ROLL ON

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  13. Don’t just comment on youtube! it will not get him elected! Vote in the primaries! google how to vote for ron paul in the primaries! He has this countries support if we just get out there and vote for him!

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  14. His voice sounds kinda weird on the phone.

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  15. Jesus Christ, Ron Paul has to win for our society to recover and survive. If this doesn’t happen, I’ll be glad to fight for socialist revolution, because that will be the only option for a positive future.

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  16. Commander in Chief of The United States Of America…Not AMERICA the Corp False Government NWO Crooks!!

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