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=YounginOnHisGrind629 YounginOnHisGrind629

    Im starting my own Ron Paul movement in Long Island, The hood is behind you! I just really hope we can be as free as your saying, and everyone had equal rights and oppurtunity. People should be free to do what ever they want. NO STEALING, NO FIGHTING or you go to jail. YOU SHOULDNT BE IN JAIL FOR A BAG OF HEMP. FREE COUNTRY

    RON FOR PRESIDENT !

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  • http://www.youtube.com/profile?user=mcgrawtim123 mcgrawtim123

    12 members of the FOMC decide our fate. Who are they? the disciples of Christ? or Mammon?

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  • http://www.youtube.com/profile?user=AshitWadhwani Ashit Wadhwani

    RON PAUL 2012 REVOLUTION REACHES INDIA via hiphop :)

    /watch?v=L9BtXMy-En0&list=PLA4­­­C5356ECE58C4B9&index=1&featu­r­e­=plcp

    mild meaningful profanity, final version soon

    Thx for comment like/dislike

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  • Samuel Wang

    Yes! Printing $Bill only delay the final judgement.
    Dr. Ron Paul is the very only one can lead us to jump out from the
    “Liquidity Trap”.

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  • Samuel Wang

    Yes! We have done a lot of “WRONG DOING”.
    Printing $Bill only delay the final judgement.
    Paul Can lead us to jump from the “liquidity trap”.
    Ron Paul 2016

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  • http://www.youtube.com/profile?user=DaveSchuman Dave Schuman

    “An idea whose time has come cannot be stopped by any government or any army”

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  • http://www.youtube.com/profile?user=SchumanD1 SchumanD1

    “An idea whose time has come cannot be stopped by any government or any army”

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  • http://www.youtube.com/profile?user=williamfan210 williamfan210

    well we could but at the moment the economy is broken as Ron just said alot of times

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

    Obama 2008 “Yes We Can (but we won’t, or didn’t)

    Paul 2012 “Yes We WILL”

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

    Obama 2008 “Yes We Can (but we won’t, or didn’t)

    Paul 2012 “Yes We WILL”

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

    Money Does NOT Stimulate the Economy!

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

    Money Does NOT Stimulate the Economy!

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  • Donald T DeFrance

    Ron Paul is our only hope…No more status-quo,,I want to live in America as it was before we trashed the Constitution..Amen

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

    Thank you Ron Paul for cutting through the fluff and FINALLY telling it like it really is. How refreshing to finally have one honest man running for office.

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  • http://www.youtube.com/profile?user=DanielGarcia Daniel Garcia

    RON PAUL 2016 LOL

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  • http://www.youtube.com/profile?user=daniel2102007 daniel2102007

    RON PAUL 2016 LOL

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

    I’m not sure what you’re asking. You ask what option to stop the interest rates from dropping. Well, I don’t think the interest rates CAN drop any lower but if you get rid of the Fed, interest rates would be set by the market and would not be fixed by the FED. Don’t be fooled, you live in a centrally planned economy.

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  • http://www.youtube.com/profile?user=futer3669 futer3669

    Their all Cubans. I don’t think there are any Americans left in this country.

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

    Thomas Jefferson and Andrew Jackson would do the same. Ron Paul 2012.

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

    What would liquidataion look like? Massive drop in prices of housing and education?

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