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To Really ‘Make America Great Again,’ End the Fed!
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Former Dallas Federal Reserve Bank President Richard Fisher recently gave a speech identifying the Federal Reserve’s easy money/low interest rate policies as a source of the public anger that propelled Donald Trump into the White House. Mr. Fisher is certainly correct that the Fed’s policies have “skewered” the middle class. However, the problem is not specific Fed policies, but the very system of fiat currency managed by a secretive central bank.

Federal Reserve-generated increases in money supply cause economic inequality. This is because, when the Fed acts to increase the money supply, well-to-do investors and other crony capitalists are the first recipients of the new money. These economic elites enjoy an increase in purchasing power before the Fed’s inflationary policies lead to mass price increases. This gives them a boost in their standard of living.

By the time the increased money supply trickles down to middle- and working-class Americans, the economy is already beset by inflation. So most average Americans see their standard of living decline as a result of Fed-engendered money supply increases.

Some Fed defenders claim that inflation doesn’t negatively affect anyone’s standard of living because price increases are matched by wage increases. This claim ignores the fact that the effects of the Fed’s actions depend on how individuals react to the Fed’s actions.

Historically, an increase in money supply does not just cause a general rise in prices. It also causes money to flow into specific sectors, creating a bubble that provides investors and workers in those areas a (temporary) increase in their incomes. Meanwhile, workers and investors in sectors not affected by the Fed-generated boom will still see a decline in their purchasing power and thus their standard of living.

Adoption of a “rules-based” monetary policy will not eliminate the problem of Fed-created bubbles, booms, and busts, since Congress cannot set a rule dictating how individuals react to Fed policies. The only way to eliminate the boom-and-bust cycle is to remove the Fed’s power to increase the money supply and manipulate interest rates.

Because the Fed’s actions distort the view of economic conditions among investors, businesses, and workers, the booms created by the Fed are unsustainable. Eventually reality sets in, the bubble bursts, and the economy falls into recession.

When the crash occurs the best thing for Congress and the Fed to do is allow the recession to run its course. Recessions are the economy’s way of cleaning out the Fed-created distortions. Of course, Congress and the Fed refuse to do that. Instead, they begin the whole business cycle over again with another round of money creation, increased stimulus spending, and corporate bailouts.

Some progressive economists acknowledge how the Fed causes economic inequality and harms average Americans. These progressives support perpetual low interest rates and money creation. These so-called working class champions ignore how the very act of money creation causes economic inequality. Longer periods of easy money also mean longer, and more painful, recessions.

President-elect Donald Trump has acknowledged that, while his business benefits from lower interest rates, the Fed’s policies hurt most Americans. During the campaign, Mr. Trump also promised to make audit the fed part of his first 100 days agenda. Unfortunately, since the election, President-elect Trump has not made any statements regarding monetary policy or the audit the fed legislation. Those of us who understand that changing monetary policy is the key to making America great again must redouble our efforts to convince Congress and the new president to audit, then end, the Federal Reserve.

(Republished from The Ron Paul Institute by permission of author or representative)
 
• Category: Economics • Tags: Federal Reserve 
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  1. These so-called working class champions ignore how the very act of money creation causes economic inequality.

    Wow, this is perfect. But I don’t suppose you meant it as communistic as it sounds?

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  2. Svigor says:

    Maybe if more libertardians had supported Trump’s campaign, libertardians would have more pull in Trump’s administration. Oh well, that ship has sailed. Maybe next time, guys.

    Read More
    • Replies: @Gabriel M
    First, Ron Paul libertarians did overwhelmingly support Trump, at least in swing states. Secondly, either having a gold currency and abolishing central banking is a good idea or not, it really has nothing to do with whether one shares libertarian moral/political views generally.
    , @jtgw
    Since when does politics ever work like that? Ron Paul and other libertarians threw their support behind Reagan and only got supply-side economics and deficit spending. You have to stand on your principles and force the politicians to meet you on your ground, not the other way around.
  3. Gabriel M says:
    @Svigor
    Maybe if more libertardians had supported Trump's campaign, libertardians would have more pull in Trump's administration. Oh well, that ship has sailed. Maybe next time, guys.

    First, Ron Paul libertarians did overwhelmingly support Trump, at least in swing states. Secondly, either having a gold currency and abolishing central banking is a good idea or not, it really has nothing to do with whether one shares libertarian moral/political views generally.

    Read More
  4. jtgw says:
    @Svigor
    Maybe if more libertardians had supported Trump's campaign, libertardians would have more pull in Trump's administration. Oh well, that ship has sailed. Maybe next time, guys.

    Since when does politics ever work like that? Ron Paul and other libertarians threw their support behind Reagan and only got supply-side economics and deficit spending. You have to stand on your principles and force the politicians to meet you on your ground, not the other way around.

    Read More
  5. Ben Frank says:

    Look at history. The US economy did very well 1944-1964 when US dollars said “Silver Certificate”, and until 1971 when Nixon floated the dollar disconnected from gold.
    Since 1971 we had the inflation of the 1970′s and the criminally negligent levels of borrowing in the Reagan, Bush II and Obama administrations.
    Letting central powers “manage” the economy did not work in USSR and will not work anywhere else.

    Read More
    • Replies: @jtgw
    Certainly the stagnation of middle class real wages correlates pretty closely with end of Bretton Woods and switch to pure fiat money. Since the 1970s stagflation, we have had stability in nominal prices, but that is not necessarily a sign of economic health. People like to claim there is no problem with QE since we haven't seen hyperinflation in most consumer price indexes; however, we are seeing massive inflation of prices in specific sectors, e.g. higher education. There is some good discussion in comments on this article over at Mises.org
  6. jtgw says:
    @Ben Frank
    Look at history. The US economy did very well 1944-1964 when US dollars said "Silver Certificate", and until 1971 when Nixon floated the dollar disconnected from gold.
    Since 1971 we had the inflation of the 1970's and the criminally negligent levels of borrowing in the Reagan, Bush II and Obama administrations.
    Letting central powers "manage" the economy did not work in USSR and will not work anywhere else.

    Certainly the stagnation of middle class real wages correlates pretty closely with end of Bretton Woods and switch to pure fiat money. Since the 1970s stagflation, we have had stability in nominal prices, but that is not necessarily a sign of economic health. People like to claim there is no problem with QE since we haven’t seen hyperinflation in most consumer price indexes; however, we are seeing massive inflation of prices in specific sectors, e.g. higher education. There is some good discussion in comments on this article over at Mises.org

    Read More
    • Replies: @Joe Levantine
    'People like to claim there is no problem with QE since we haven’t seen hyperinflation in most consumer price indexes; however, we are seeing massive inflation of prices in specific sectors, e.g. higher education.'
    Actually the inflation we have seen is in assets such as stocks and real estate. This kind of inflation is good for the super rich since it increases their wealth but can be hurtful to other classes since it makes them pay more for a home.
    The reason why there has not been core inflation despite all the loose many supply is that the 99% are not benefiting from the FED policies and have less money to spend and thus there is no demand to allow prices to rise nor there is velocity for the mass of printed currency.
    The U.S. Constitution puts the printing of money solely in the hands of congress. But the Federal Reserve Act of 1913 and the taking of the U.S. Dollar off the gold standard in 1971 took this most fundamental tool of national sovereignty from the representatives of the people to a self styled monetary gate keepers with an unlimited capacity to expand the money supply.
    Some supporters of the FED would argue that congress is not able to manage the money supply. To this I respond that the most safe and simple formula for this purpose is to tie the increase in the money supply to the increase in productivity and to let commercial banks settle the equilibrium of interest rates through market operations.
    The FED was supposed to bring stability into the markets. What it has brought are the 1929 depression and the near depression of 2008 and a rate of inflation over its tenure that eroded more than 95% of the value of the Dollar and the constant boom and bust cycle.
    Indeed it is time to end the FED but don't expect it from a Trump administration.
  7. Svigor says:

    Since when does politics ever work like that? Ron Paul and other libertarians threw their support behind Reagan and only got supply-side economics and deficit spending. You have to stand on your principles and force the politicians to meet you on your ground, not the other way around.

    Libertardians are complete squishes on immigration issues. Worse than many Democrats, it seems. And many (if not most) libertardians are pro-BLM, Team Trayvon, etc.

    Libertardians completely betray their own principles on civil rights issues (the way Greens completely betray their own principles on immigration and overpopulation). Libertardians are pretty much in lockstep with the panoply of anti-freedom laws labelled “anti-discrimination.” Libertardians only seem enthusiastic about issues where they agree with the left, like drugs.

    The 2nd Amendment’s a pretty thin reed, after all of that mess.

    Read More
    • Replies: @jtgw
    You have a pretty narrow and uninformed view of what libertarians believe. Maybe check out what people like Ron Paul and Tom Woods actually say and believe before spouting more bullshit like that.

    E.g. Tom Woods has been very critical of Johnson's support for anti-discrimination law.

  8. Svigor says:

    When was the last time Ron Paul had a piece here that would really unsettle the left? I can’t recall any such.

    Read More
    • Replies: @jtgw
    Anything calling for an end to the welfare state, perhaps?
  9. jtgw says:
    @Svigor

    Since when does politics ever work like that? Ron Paul and other libertarians threw their support behind Reagan and only got supply-side economics and deficit spending. You have to stand on your principles and force the politicians to meet you on your ground, not the other way around.
     
    Libertardians are complete squishes on immigration issues. Worse than many Democrats, it seems. And many (if not most) libertardians are pro-BLM, Team Trayvon, etc.

    Libertardians completely betray their own principles on civil rights issues (the way Greens completely betray their own principles on immigration and overpopulation). Libertardians are pretty much in lockstep with the panoply of anti-freedom laws labelled "anti-discrimination." Libertardians only seem enthusiastic about issues where they agree with the left, like drugs.

    The 2nd Amendment's a pretty thin reed, after all of that mess.

    You have a pretty narrow and uninformed view of what libertarians believe. Maybe check out what people like Ron Paul and Tom Woods actually say and believe before spouting more bullshit like that.

    E.g. Tom Woods has been very critical of Johnson’s support for anti-discrimination law.

    Read More
  10. jtgw says:
    @Svigor
    When was the last time Ron Paul had a piece here that would really unsettle the left? I can't recall any such.

    Anything calling for an end to the welfare state, perhaps?

    Read More
  11. Ivan K. says:

    What libertarians do:

    spurn public transport -> prefer to drive cars
    get a driver licence – from the state
    pay taxes to the state
    serve as representatives in the state apparatus
    the best of them launch a campaign for presidency, the highest position of the system they condemn as evil, and the rest of libertarians mostly support that campaign

    Then comes along a guy who is an alternative to turning the country into another Brazil, a total dystopia with a state that would try initiate a world war.

    Lew Rockwell’s circle of libertarians say: Disgusting! They are all the same! There can be no state solution to anything! Never will I break my principles and participate in voting!

    Read More
    • Replies: @jtgw
    Rockwell has been pretty supportive of Trump. Some libertarians went so far as to endorse him, e.g. Walter Block. Seriously, do some research before commenting.
  12. Libertarianism is a an infantile theory. What needs to be done is to nationalize the Fed and then demofy it, allowing the people to vote on the heads of it to serve the peoples interests.

    Read More
    • Replies: @jtgw
    And how would that help?

    The problem is fiat currency, not whether or not the creation of money out of thin air is handed over to democrats or technocrats.
  13. jtgw says:
    @Ivan K.
    What libertarians do:

    spurn public transport -> prefer to drive cars
    get a driver licence - from the state
    pay taxes to the state
    serve as representatives in the state apparatus
    the best of them launch a campaign for presidency, the highest position of the system they condemn as evil, and the rest of libertarians mostly support that campaign

    Then comes along a guy who is an alternative to turning the country into another Brazil, a total dystopia with a state that would try initiate a world war.

    Lew Rockwell's circle of libertarians say: Disgusting! They are all the same! There can be no state solution to anything! Never will I break my principles and participate in voting!

    Rockwell has been pretty supportive of Trump. Some libertarians went so far as to endorse him, e.g. Walter Block. Seriously, do some research before commenting.

    Read More
  14. jtgw says:
    @folktruther
    Libertarianism is a an infantile theory. What needs to be done is to nationalize the Fed and then demofy it, allowing the people to vote on the heads of it to serve the peoples interests.

    And how would that help?

    The problem is fiat currency, not whether or not the creation of money out of thin air is handed over to democrats or technocrats.

    Read More
  15. @jtgw
    Certainly the stagnation of middle class real wages correlates pretty closely with end of Bretton Woods and switch to pure fiat money. Since the 1970s stagflation, we have had stability in nominal prices, but that is not necessarily a sign of economic health. People like to claim there is no problem with QE since we haven't seen hyperinflation in most consumer price indexes; however, we are seeing massive inflation of prices in specific sectors, e.g. higher education. There is some good discussion in comments on this article over at Mises.org

    ‘People like to claim there is no problem with QE since we haven’t seen hyperinflation in most consumer price indexes; however, we are seeing massive inflation of prices in specific sectors, e.g. higher education.’
    Actually the inflation we have seen is in assets such as stocks and real estate. This kind of inflation is good for the super rich since it increases their wealth but can be hurtful to other classes since it makes them pay more for a home.
    The reason why there has not been core inflation despite all the loose many supply is that the 99% are not benefiting from the FED policies and have less money to spend and thus there is no demand to allow prices to rise nor there is velocity for the mass of printed currency.
    The U.S. Constitution puts the printing of money solely in the hands of congress. But the Federal Reserve Act of 1913 and the taking of the U.S. Dollar off the gold standard in 1971 took this most fundamental tool of national sovereignty from the representatives of the people to a self styled monetary gate keepers with an unlimited capacity to expand the money supply.
    Some supporters of the FED would argue that congress is not able to manage the money supply. To this I respond that the most safe and simple formula for this purpose is to tie the increase in the money supply to the increase in productivity and to let commercial banks settle the equilibrium of interest rates through market operations.
    The FED was supposed to bring stability into the markets. What it has brought are the 1929 depression and the near depression of 2008 and a rate of inflation over its tenure that eroded more than 95% of the value of the Dollar and the constant boom and bust cycle.
    Indeed it is time to end the FED but don’t expect it from a Trump administration.

    Read More
  16. Svigor says:

    C’mon, man. Libertarians in general are drowned out by crickets on so-called “anti-discrimination” laws. The left’s thumb is dug straight into their eyeballs, and they got nothing to say.

    Libertarianism is a viper’s nest of globalism.

    Read More
  17. Svigor says:

    If I can find a couple of Democrats who endorsed Trump, does that make everything okay?

    Read More
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