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.



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185 Comments:

  1. no what you did is called stupid , insane is something different you are just an ignorant moron .

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  2. the weight of a store boxed pizza dropped by almost half in the last couple years, and the price went up .

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  3. the weight of a store boxed pizza dropped by almost half in the last couple years, and the price went up .

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  4. the weight of a store boxed pizza dropped by almost half in the last couple years, and the price went up .

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  5. the weight of a store boxed pizza dropped by almost half in the last couple years, and the price went up .

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  6. You think I bothered to read all that? I only looked over it enough to know you are insane.

    Completely insane.

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  7. Am I the only one who thinks that some of you people are way to angry?

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  8. Unemployment rate is 8.1%. U6 rate which includes people working part time who want to work full time is 15%. Real GDP is higher now than at the peak of the business cycle in 2007 when the economy was at full employment. Explain how that is possible if unemployment is over 25%. You can't. You idiot.

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  9. The annual rate of inflation as of August was 1.7%/year dumb ass. The problem is low inflation, not high inflation. You stupid schmuck.

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  10. Come on people! If we want to stop the Fair Tax Fraud then vote for Ron Paul!

    Fascist Governor of New Mexico Gary Johnson is supporting the fraudulent Fair Tax System!

    ronpaul2012 . net

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  11. That's that brainwashing talking. I didn't equate the jewish race into this, I just said the jewish media and the jewish bankers. They have trained you to think like that so you would protect them.
    The jews have to be mentioned so that people know what to look for when they check this information out. The jews "happen" to own the media, it's a fact. Can facts be antisemitic? No they cannot be. It is a major conspiracy and it is a jewish operation. These bankers have done it many times before.

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  12. That's that brainwashing talking. I didn't equate the jewish race into this, I just said the jewish media and the jewish bankers. They have trained you to think like that so you would protect them.
    The jews have to be mentioned so that people know what to look for when they check this information out. The jews "happen" to own the media, it's a fact. Can facts be antisemitic? No they cannot be. It is a major conspiracy and it is a jewish operation. These bankers have done it many times before.

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  13. The Barack creature = the Mitt creature — do NOT vote for either Puppet!

    Vote Gary Johnson (Ron Paul has "unofficially" endorsed him)!

    Read between the lines of this Ron Paul 20 second video!

    https://www.youtube.com/watch?v=G40RyysZcWc

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  14. Deliberate. Some people just don't want to face reality. Their ego and greed is more important than any true long-term prosperity.

    Ron Paul did get screwed in the election if you do the research. Mitt Romney cheated his way to the top.

    Don't bring anti-Semitism into the picture. Equating the whole Jewish race with Zionism is just as bad as the people who criticize Obama for being black. It accomplishes nothing, but incites a shit storm which completely blemishes the entire freedom movement.

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  15. This stuff doesn't just happen, someone makes them happen. Are they mistakes or deliberate? Was it a coincidence that Ron Paul got screwed in the presidential election?
    I believe that West is more corrupted than Darth Vader's turds. What makes this problem even more difficult is the fact that the media is part of it. And as a bonus the mass media is owned by jews and criticizing the jews is extremely difficult because they have victimized themselves so nobody would dare speak about it.

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  16. This stuff doesn't just happen, someone makes them happen. Are they mistakes or deliberate? Was it a coincidence that Ron Paul got screwed in the presidential election?
    I believe that West is more corrupted than Darth Vader's turds. What makes this problem even more difficult is the fact that the media is part of it. And as a bonus the mass media is owned by jews and criticizing the jews is extremely difficult because they have victimized themselves so nobody would dare speak about it.

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  17. We need more brave journalist women like Amber Lyon.

    Last night interview with three-time Emmy award-winning journalist, photographer, and former CNN reporter Amber Lyon to discuss the brazenly false stories CNN forced her to report

    Exclusive: CNN Exposed! Caught Producing "State Sponsored News" in Bahrain
    http://www.youtube.com/watch?feature=player_embedded&v=eGDVzJNMKs8

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  18. Gary is not a serious candidate by any stretch of the imagination. Ron Paul is the only one who can save us now. Although some states don't allow or count write ins there are still 42 STATES THAT DO!!!

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  19. Sorry, when Gary starts talking about his taxation policies he sounds more and more like a New World Order shill..

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  20. worse than that, the WH is telling our defense contractors not to send out lay-off notices to potentially hundreds of thousands of workers!

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