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.

  • http://www.youtube.com/profile?user=applemorgan applemorgan

    2012 Peace = PRESIDENT DR RON PAUL

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  • http://www.youtube.com/profile?user=1nav 1nav

    dang that was a good one

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  • http://www.youtube.com/profile?user=tenderserena tenderserena

    Why do I see nothing about Ron Paul except online!!!!

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  • http://www.youtube.com/profile?user=ronpaul2012robust ronpaul2012robust

    Ron, become better at analogys to be able to break these things down to lamen levels witch would be especially good for your debates.

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  • http://www.youtube.com/profile?user=linvann69 linvann69

    FREEDOM RON PAUL 2012

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  • http://www.youtube.com/profile?user=TheLmfaostudios TheLmfaostudios

    Ron Paul 2012!!!! HELL YES!!

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  • http://www.youtube.com/profile?user=TomHasVideo TomHasVideo

    RON PAUL NEVER12

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  • http://www.youtube.com/profile?user=toetouching toetouching

    This man needs to be the face of the new gold coin.

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  • http://www.youtube.com/profile?user=4Freedomrider 4Freedomrider

    We need to have a National Audit on how much of America did the Banksters buy up with their printing presses. It seems like they own everything. They have all the best locations and it seems like a scam or are they hiding their true owners by constantly being bought by other banks.

    We have all played a game of Monopoly and we know how it ends if you don’t keep an eye on the banker.

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  • concerned1

    We had 2 depressions when we were using the gold standard . Why would going back to the gold standard be any better? I know he points out who would benefit by going to gold standard but who would be on the losing end? What segment of our society would be crushed? If he wants people to get on board with this he needs to detail the good the bad and ugly part of doing this. Some people are going to be hurt by this and it won’t be just the rich. How will it effect the poorest of our nation short term and long term? These are things people need to know. Not just the good.

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  • http://www.youtube.com/profile?user=PistolPackingPatriot PistolPackingPatriot

    I swear, Ron Paul could campaign on a platform promising every American $1 million each, and they’d still vote for more tyranny, poverty, unemployment, inflation, oppression, wars and corruption. You just can’t make these horses drink water.

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  • http://www.youtube.com/profile?user=cbrabb cbrabb

    GO FREEDOM!

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  • Liberty

    Audit Fort Knox. I bet that the guards are guarding nothing at all. Our currency is worth nothing without gold backing it. The continuous printing of money would stop.

    We will have hyperinflation, when Bernake finally increases the interest rate. It’s being artificially kept down until, after the elections. But, the banks are sure making a profit with it being kept so low. When it finally rises, our gas and food prices will be very high. Our retirement and college savings account, and our investments will dramically decrease in value.

    The deficit has surpassed our GDP. The voters must not rely on the MSM for their information. We are at the point of no return.

    Vote For RON PAUL!!!

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  • http://www.youtube.com/profile?user=ronaldliu224 ronaldliu224

    People gotta know, the same people that owns the fed, owns all the media networks. They can print about 10,000 dollars in about a split second. Since 1913, American exports hardly anything out except your dollars!

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  • http://www.youtube.com/profile?user=TexianPride TexianPride

    Texas wants Ron Paul 2012

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  • http://www.youtube.com/profile?user=ju88ff ju88ff

    You’re wrong Ron!! It’s because of bailouts that the economy hasn’t sunk!

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  • http://www.youtube.com/profile?user=emilnomel2009 emilnomel2009

    Ron Paul is correct to get rid of the FED. But I prefer the solution proposed by Bill Still. Government controlled fiat money supply. Besides there is no gold in Fort Knox so what do we base a Gold backed money on, do we now buy gold at inflated prices. I don’t get it and Ron Paul doesn’t explain how he would do it.

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  • http://www.youtube.com/profile?user=PureLuckAtBest PureLuckAtBest

    They are so desperate! Look at the videos on the side bar, there trying to make him look bad. Man! The media is pathetic!

    Ron Paul 2012!

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  • Alexey

    Andrew Mellon was a Secretary of the Treasury until February 12, 1932. Why was the US financial policy different after 1929? Why didn’t Mellon leave the post if the policy was not how he thought was necessary?

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  • http://www.youtube.com/profile?user=westerlund24 westerlund24

    RonPaulRonPaul!___RonPaulRonPa­ul!___RonPaul!___RonPaulRonPau­l!
    _______RonPaul!___Ron_______Pa­ul!___RonPaul!__________RonPau­l!
    _______RonPaul!___Ron_______Pa­ul!___RonPaul!__________RonPau­l!
    RonPaulRonPaul!___Ron_______Pa­ul!___RonPaul!___RonPaulRonPau­l!
    RonPaul!__________Ron_______Pa­ul!___RonPaul!___RonPaul!_____­_
    RonPaulRonPaul!___RonPaulRonPa­ul!___RonPaul!___RonPaulRonPau­l!

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