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Janet Yellen: False Prophet of Prosperity
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Federal Reserve Chair Janet Yellen recently predicted that, thanks to the regulations implemented after the 2008 market meltdown, America would not experience another economic crisis “in our lifetimes.” Yellen’s statement should send shivers down our spines, as there are few more reliable signals of an impending recession, or worse, than when so-called “experts” proclaim that we are in an era of unending prosperity.

For instance, in the years leading up to the 2008 market meltdown, then-Fed Chair Ben Bernanke repeatedly denied the existence of a housing bubble. In February 2007, Bernanke not only denied that “sluggishness” in the housing market would affect the general economy, but predicted that the economy would expand in 2007 and 2008. Of course, instead of years of economic growth, 2007 and 2008 were marked by a market meltdown whose effects are still being felt.

Yellen’s happy talk ignores a number of signs that the economy is on the verge of another crisis. In recent months, the US has experienced a decline in economic growth and the value of the dollar. The only economic statistic showing a positive trend is the unemployment rate — and that is only because the official unemployment rate does not count those who have given up looking for work. The real unemployment rate is at least 50 percent higher than the manipulated “official” rate.

A recent Treasury Department report’s called for rolling back of bank regulations could further destabilize the economy. This seems counterintuitive, as rolling back regulations usually contributes to economic growth. However, rolling back bank regulations without ending subsidies like deposit insurance that create a moral hazard that incentivizes banks to engage in risky business practices could cause banks to resume the unsound lending practices that were a major contributor to the growth, and collapse, of the housing bubble.

The US economy is already faced with several bubbles that could implode at any time. These include bubbles in student loans and automobiles sales, and even another housing bubble. The most dangerous of these bubbles is the government bubble caused by excessive spending. According to a 2016 study by the Mercatus Center, at least four states could soon join Puerto Rico and Illinois in facing bankruptcy.

Of course, the mother of all government bubbles is the federal spending bubble. Despite claims of both defenders and critics of the president’s budget, neither President Trump nor the Republican Congress have any plans for, or interest in, reducing spending in any area. Even the so-called cuts in Medicare and other entitlement programs that have generated such hysterics are not real cuts, but “reductions in the rate of growth.”

Some fiscal conservatives are praising the administration’s proposal to finance transportation spending via government bonds. However, the people will eventually have to pay for these bonds either directly through income taxes or indirectly through the inflation tax. Government-issued bonds harm the economy by diverting investment capital away from the private sector to the “mixed economy” controlled by politicians, bureaucrats, and crony capitalists.

If Congress continues to increase spending and the Federal Reserve continues to facilitate that spending by monetizing the debt, Americans will face an economic crisis more severe than the Great Depression. The crisis will likely result from a rejection of the dollar as the world’s reserve currency. Those of us who know the truth must redouble our efforts to ensure a peaceful transition away from the Keynesian system of welfare, warfare, and fiat currency to a society of peace, prosperity, and liberty.

(Republished from The Ron Paul Institute by permission of author or representative)
 
• Category: Economics • Tags: Federal Reserve 
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  1. Greg Bacon says: • Website

    Don’t think the FED will let Wall Street blow up again until the Pentagon gets done destroying Syria and we’re ‘Shocking and Awing’ Iran, then Yellen and Fischer will let the house of cards come tumbling down, making 2008 seem like a picnic.

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  2. You are preaching to the choir, as far as this reader goes. OK, you are preaching to the Southern Regional Arch-Deacon of Liberty here, Ron, how’s that?

    Anyway, this sounds like Zerohedge material, so, is it Ron Paul reading Tyler Durden, or Tyler Durden reading Ron Paul? I would tend to think the latter, since Ron Paul has understood this stuff and dealt with our riff-raff “leaders” in Washington, Federal Shithole for 40 years, yet Tyler Durden was in his diapers watching Fight Club over his happy meals most of that time.

    The first rule of Fight Club: “You DO NOT TALK ABOUT HOW MUCH THE MOVIE SUCKS!”

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  3. The crisis will likely result from a rejection of the dollar as the world’s reserve currency.

    So what? The IRS won’t reject the dollar as the unit to pay our Federal taxes, and that continues to give the dollar enough value to work as our currency.

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  4. The crisis will likely result from a rejection of the dollar as the world’s reserve currency.

    So what?

    So what? He’s offering a warning, not whining about the rejection of the dollar as a reserve currency. If one understands what that means, then “so what” is a pretty hilarious response.

    One good thing that could come from that would be that the US would be less likely to wage so many stupid wars, but if other countries were no longer forced to buy dollars, do you know what that would do to the standard of living in the US? A good thing about that is that the “patriotic” and nationalistic simpletons would no longer be able to sneer at other “third world” countries, at least with a straight face.

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  5. Miro23 says:

    The crisis will likely result from a rejection of the dollar as the world’s reserve currency.

    That actually seems quite likely but it could take some time. British Imperial trade backed the Pound Sterling as the world’s reserve currency and even without this backing (1918+) it struggled on with a secondary reserve role to the Dollar until the early 1970′s.

    An alternative to the Dollar is not so clear. The Euro has political problems and the Chinese Yuan is too unfamiliar and non-international.

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