Ron Paul: How the Fed’s “Wise Gurus” Devastate America

by Ron Paul

One of the most enduring myths in the United States is that this country has a free market, when in reality, the market is merely the structural shell of formerly free institutions. Government pulls the strings behind the scenes. No better illustration of this can be found than in the Federal Reserve’s manipulation of interest rates.

The Fed has interfered with the proper function of interest rates for decades, but perhaps never as boldly as it has in the past few years through its policies of quantitative easing. In Chairman Bernanke’s most recent press conference he stated that the Fed wishes not only to drive down rates on Treasury debt, but also rates on mortgages, corporate bonds, and other important interest rates. Markets greeted this statement enthusiastically, as this means trillions more newly-created dollars flowing directly to Wall Street.

Because the interest rate is the price of money, manipulation of interest rates has the same effect in the market for loanable funds as price controls have in markets for goods and services. Since demand for funds has increased, but the supply is not being increased, the only way to match the shortfall is to continue to create new credit. But this process cannot continue indefinitely. At some point the capital projects funded by the new credit are completed. Houses must be sold, mines must begin to produce ore, factories must begin to operate and produce consumer goods.

But because consumption patterns have either remained unchanged or have become more present-oriented, by the time these new capital projects are finished and begin to produce, the producers find no market for their goods. Because the coordination between savings and consumption was severed through the artificial lowering of the interest rate, both savers and borrowers have been signaled into unsustainable patterns of economic activity. Resources that would have been used in productive endeavors under a regime of market-determined interest rates are instead shuttled into endeavors that only after the fact are determined to be unprofitable. In order to return to a functioning economy, those resources which have been malinvested need to be liquidated and shifted into sectors in which they can be put to productive use.

Another effect of the injections of credit into the system is that prices rise. More money chasing the same amount of goods results in a rise in prices. Wall Street and the banking system gain the use of the new credit before prices rise. Main Street, however, sees the prices rise before they are able to take advantage of the newly-created credit. The purchasing power of the dollar is eroded and the standard of living of the American people drops.

We live today not in a free market economic system but in a “mixed economy”, marked by an uneasy mixture of corporatism; vestiges of free market capitalism; and outright central planning in some sectors. Each infusion of credit by the Fed distorts the structure of the economy, damages the important role that interest rates play in the market, and erodes the purchasing power of the dollar. Fed policymakers view themselves as wise gurus managing the economy, yet every action they take results in economic distortion and devastation.

Unless Congress gets serious about reining in the Federal Reserve and putting an end to its manipulation, the economic distortions the Fed has caused will not be liquidated; they will become more entrenched, keeping true economic recovery out of our grasp and sowing the seeds for future crisis.

  • http://www.youtube.com/profile?user=GonG108 GonG108

    ron paul was a real hope not only for the us american voters but for the rest of the US influenced world too .
    i like Mr. Paul and i would have been the first foreigner in a foreign country ( germany ) who would have voted for him if possible .I have watched this whole caucuses thing and how they twisted and bend their rules and if it was not enough , no prob . let´s make a new rule . this was unbelievable to me , specially why he ( Mr. Paul ) did not open up his own third Party

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  • http://www.youtube.com/profile?user=GonG108 GonG108

    no no i cannot accuse someone just because i have heard something but i am very disappointed of how it turned out

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  • http://www.youtube.com/profile?user=GonG108 GonG108

    no no i cannot accuse someone just because i have heard something but i am very disappointed of how it turned out

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  • http://www.youtube.com/profile?user=cgng37 cgng37

    Rev 20-15 And whosoever was not found written in the book of life was cast into the lake of fire. watch?v=d3zkoxi1Nos

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  • http://www.youtube.com/profile?user=Astra2012 Astra2012

    history will definitey show the only sane voice there – Ron Paul.
    Are we HELPLESS whe they rob us?

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  • robin

    French Canadian,
    Here is an interview with Merlin Miller who is running for president as a third party candidate. This is who my husband likes. Note: Since he is outspoken about Israel, he has been labeled a “racist” and anti=Semitic. http://www.youtube.com/watch?v=5fgFXO522NU He is also a veteran and independent filmmaker. He is definitely not a globalist.

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

    Ron Paul has the plurality in 5 states, enough to be nominated but they changed the rules before the nomination

    1. Elected delegates were not seated..

    2. delegates held on bus they could not vote

    3. pre-scripted a teleprompter shows election fraud

    4. Minority report was not presented for consideration

    5. Entire counties were not counted & showed 0 votes

    6. In a competition, when someone cheats, he gets disqualified.

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

    Ron Paul has the plurality in 5 states, enough to be nominated but they changed the rules before the nomination

    1. Elected delegates were not seated..

    2. delegates held on bus they could not vote

    3. pre-scripted a teleprompter shows election fraud

    4. Minority report was not presented for consideration

    5. Entire counties were not counted & showed 0 votes

    6. In a competition, when someone cheats, he gets disqualified.

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  • French Canadian

    Gary Jonhson’s interview starts at 25:04:00

    2012-09-24 INFOWARS Nightly News Alex Jones Monday Gary Johnson
    http://blogdogcicle.blogspot.ca/

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

    All this leads towards a new monetary system, real soon. 2015 will bring new international monetary frame and possibly an ice-free Arctic. Tommy Jackets is right- fasten your belts really tight, ladies.

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  • http://www.youtube.com/profile?user=aerton1 aerton1

    At some point, America will DEFAULT.

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  • http://www.youtube.com/profile?user=aerton1 aerton1

    BRILLIANTLY explained

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  • Citizen

    Another profound statement by Dr. Paul…
    The FED is a total distortion of Economic fundamentals
    The FED is a transfer of wealth from the poor and middle class to the Elites!

    If Romney Republicans wants to win this race…

    They need to expose the Ignorant Progressive Mantra of
    “Fair Share” and anti-profits for what it is,

    +++DISTRIBUTION of POVERTY+++

    Profit is the essential Return on Capital…
    Absent profits, there is no future

    The FED is hell bent on DESTROYING PROFIT…
    by handing the Banking Elite our hard earned capital.
    Savings are destroyed
    Interest and Rent on Capital are destroyed.

    There is no Hope when the Socialists
    “REDISTRIBUTE”
    the wealth by bankster grand theft!

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    • French Canadian

      Citizen,

      I agree with you.

      I’ve just finished listening to Gary Johnson interview on Infowars Nightly News by a new reporter on the show called David Ortiz. Gary Jonhson was in studio and he did give a great interview. One of the first thing he wants to do is to abolish the FED and bring in competitive currencies. He also wants to end the IRS, bring the troops home and legalize marijuana. I like this guy!

      The interview is not yet available on youtube… I’ll try to post it later as soon as it is available. Worth watching!.

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

    Thank you for uploading these. Mondays are hectic and I forget to call.

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

    Truer words cannot be spoken against our government! PRESIDENT PAUL PRESIDENT PAUL PRESIDENT PAUL!!!!

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  • http://www.youtube.com/profile?user=TommyJackets Tommy Jackets

    I have seen Ron Paul do the masonic handshakes… Our founding fathers, the original libertarians were masons… The freemasons are not bad people, there are secret societies that originated from the masons like the illuminati- I’m not sure exactly how they have manipulated the ideologies and stuff exactly but those are deviations of masons. The real masons helped found this country and build/secure the freedoms you were originally entitled to. They are not the enemy. Some of the subgroups are

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  • http://www.youtube.com/profile?user=TommyJackets Tommy Jackets

    Join a local militia… start preparing for economic collapse. Connect with your community. Start talking to like minded people. Read and share information with your friends and family. Fill your cabinets with canned vegetables and proteins (tuna, salmon, chicken, beans). Make a bug out bag for everyone in your family. Train physically, start with running even just 15 minutes a day until that gets to be too easy… keep challenging yourself and going further. Last but not least, stock up on guns

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

    Be real vote for Gary Johnson!!!!!!!

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  • http://www.youtube.com/profile?user=TommyJackets Tommy Jackets

    Youtube revolutionaries are a dime a dozen these days… It’s good to see that people are pissed off to atleast make comments on youtube videos instead of completely looking the other way but by golly you people have a long way to go. Wake… the… fuk… up. This election exposed the fraudulent nature of what an election really is. I know this has been said a thousand times over but your vote doesnt matter. This year at the RNC the process was exposed, Ron Paul’s delegates were banned.

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  • http://www.youtube.com/profile?user=rickrick1545 rickrick1545

    LOVE WHAT THIS MAN STANDS FOR FOR I’D GO TO WAR FOR HIM.

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