Ron Paul: Federal Reserve Steals From the Poor and Gives to the Rich

by Ron Paul

Last Thursday the Senate Banking Committee held hearings on Janet Yellen’s nomination as Federal Reserve Board Chairman. As expected, Ms. Yellen indicated that she would continue the Fed’s “quantitative easing” (QE) polices, despite QE’s failure to improve the economy. Coincidentally, two days before the Yellen hearings, Andrew Huszar, an ex-Fed official, publicly apologized to the American people for his role in QE. Mr. Huszar called QE “the greatest backdoor Wall Street bailout of all time.”

As recently as five years ago, it would have been unheard of for a Wall Street insider and former Fed official to speak so bluntly about how the Fed acts as a reverse Robin Hood. But a quick glance at the latest unemployment numbers shows that QE is not benefiting the average American. It is increasingly obvious that the Fed’s post-2008 policies of bailouts, money printing, and bond buying benefited the big banks and the politically-connected investment firms. QE is such a blatant example of crony capitalism that it makes Solyndra look like a shining example of a pure free market!

It would be a mistake to think that QE is the first time the Fed’s policies have benefited the well-to-do at the expense of the average American. The Fed’s polices have always benefited crony capitalists and big spending politicians at the expense of the average American.

By manipulating the money supply and the interest rate, Federal Reserve polices create inflation and thereby erode the value of the currency. Since the Federal Reserve opened its doors one hundred years ago, the dollar has lost over 95 percent of its purchasing power —that’s right, today you need $23.70 to buy what one dollar bought in 1913!

As pointed out by the economists of the Austrian School, the creation of new money does not impact everyone equally. The well-connected benefit from inflation, as they receive the newly-created money first, before general price increases have spread through the economy. It is obvious, then, that middle- and working-class Americans are hardest hit by the rising level of prices.

Congress also benefits from the devaluation of the currency, as it allows them to increase welfare- and warfare-spending without directly taxing the people. Instead, the increase is only felt via the hidden “inflation tax.” I have often said that the inflation tax is one of the worst taxes because it is hidden and because it is regressive. Of course, there is a limit to how long the Fed can facilitate big government spending without causing an economic crisis.

Far from promoting a sound economy for all, the Federal Reserve is the main cause of the boom-and-bust economy, as well as the leading facilitator of big government and crony capitalism. Fortunately, in recent years more Americans have become aware of how the Fed is impacting their lives. These Americans have joined efforts to educate their fellow citizens on the dangers of the Federal Reserve and have joined efforts to bring transparency to the Federal Reserve by passing the Audit the Fed bill.

Auditing the Fed is an excellent first step toward restoring a monetary policy that works for the benefit of the American people, not the special interests. Another important step is to repeal legal tender laws that restrict the ability of the people to use the currency of their choice. This would allow Americans to protect themselves from the effects of the Fed’s polices. Auditing and ending the Fed, and allowing Americans to use the currency of their choice, must be a priority for anyone serious about restoring peace, prosperity, and liberty.


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  • John
  • Scott

    QE is terrible. It is creating money out of thin air. The two comments below miss the point of the article.

  • JOHN

    QE is making the federal debt disappear.

    • John Smith

      This is not true! It is not making the federal deficit disappear what it is doing is adding to the Federal Reserves own deficit. That debt amassed by the Fed is your responsibility! If they Fed is short a dollar, you the American people must make it up.

      Unlike others little informed, I understand one of the real functions of authentic taxation and that’s to return loose money that defaulted into the system back to the origin so that inflation does not occur and the system does not slow down into stagflation like we had in the seventies. Money that the Fed dumps into the system MUST COME BACK this is natural and necessary and the only way is usually through taxation if the Fed loses count. Much of this is very difficult to explain, but the point is that there is no way to reduce the deficit itself through printing….we will all owe that money for decades.

  • The Fed has implemented and completed four different programs. Three Quantitative Easing programs (QE1, QE2 & QE3) and Operation Twist (Fed buys long-term bonds and substitutes for short-term in order to bring down interest rates). QE3 was announced in September 2012 with the stated goal of further stimulating growth with particular focus on employment. By implementing QE1 and 2 the Fed did prevent a massive and quick de-leveraging of the financial system following the 2008 crisis, and by doing so likely prevented a depression from occurring during that period