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Federal Reserve Failure
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What do the Federal Reserve and neoconservatives have in common? They both refuse to admit that their policies — the neocons’ promotion of perpetual war and the Fed’s manipulation of the money supply — are complete failures, having produced the opposite of the promised results.

The latest example of the Federal Reserve engaging in Bill Kristol-like levels of denial is the Fed’s continued insistence that the return of 70s-style inflation is a “transitory” phenomenon resulting from the end of the lockdowns. The Fed has acknowledged the “transitory” inflation will last until at least 2022, yet it is still determined to keep interest rates at or near zero until the “jobs situation” improves.

To be fair, the Fed has finally announced plans to cut back on its money-pumping activities by reducing by 15 billion dollars a month its monthly purchase of 80 billion dollars of Treasury bonds and 40 billion dollars of mortgage-backed assets.

It is unlikely that the Fed will stick to its plans to “taper” its purchase of Treasury bonds. The Fed’s Treasury bond purchases enable the federal government to run up the debt without increasing taxes or paying punishingly high interest on the debt.

The Congressional Budget Office projects that by 2030 the federal debt interest cost will more than double to 829 billion dollars. That is more than the government spent on the military in 2020!

Despite the looming fiscal crisis, Congress is unlikely to cut spending anytime soon. Instead, Congress members are debating a 1.75 trillion dollars “social spending” plan, having just passed a 1.2 trillion dollars infrastructure bill. Contrary to the claims of President Biden and his allies, this new spending will not reduce inflation. What it will do is hasten and deepen the inevitable economic crisis caused by government overspending.

Of course, most Republicans will continue opposing big increases in spending and debt … as long as a Democrat sits in the Oval Office. A Republican who becomes president will likely believe, as Dick Cheney has said, that President Reagan taught us that deficits don’t matter. The difference between the parties is Republicans are less likely to raise taxes. So, no matter who controls Congress and the presidency, spending and debt can keep increasing.

The Fed may also take dramatic action to keep interest rates low if other purchasers of federal debt demand higher interest rates in anticipation of future inflation. Such a situation would be a sign of what Ludwig von Mises called a crack-up boom. A crack-up boom occurs when the public anticipates continuing devaluation of the currency, causing them to factor future price increases into their economic plans.

Crack-up booms are preceded or accompanied by economic crises that can lead to the rise of authoritarianism. However, this is not inevitable. Important steps can be taken including cutting spending on militarism and corporate welfare, phasing out the entitlement and welfare programs, and auditing and ending the Fed. Those of us who know the truth should seek to convince our fellow citizens of the importance of restoring a limited, constitutional government that does not try to run the economy, run the world, or run our lives.

(Republished from The Ron Paul Institute by permission of author or representative)
• Category: Economics • Tags: Federal Reserve, Government Debt, Inflation 
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  1. David says:

    Federal Reserve and neoconservatives haven’t refused to admit that their policies have failed. They’ve refused to admit what the real objectives of their policies are. I bet both are succeeding beyond their most optimistic expectations.

  2. What the fed and other central bank’s are doing by printing money is destroying the value of retirees who keep their wealth in cash, once they have done this they will turn off the money printing and pull the rug from under the assett bubble and destroy the capital of retirees that hold their assets in stocks.

    This has been deliberate, but what astonishes me is why foreign countries continue to do their exchanges with worthless confetti called the greenback?

    When most countries stop using the greenback then the end is nigh for the empire.

    This is what is driving crypto currencies, the fight to be the next economic currency king.

  3. @KJB Mid Acts Pauline Dispensationalist

    The ghost of Paul Volcker* could come back tomorrow, Dispy, and he wouldn’t be able to do what he did 40 years ago. The US economy COULD NOT HANDLE THE TRUTH! [/A Few Good Men]

    There’s 2 reasons why it can’t:

    1) 40 years ago, the majority of Americans hadn’t all been forced into a risky Ponzi-scheme-style stock market, with their 401(k)’s. There were dividends from stable Big Biz stocks with reasonable capitalizations and Treasury Bonds were still backed by the government of the largest production economy in the world by far. Now, if there were to be a decent non-risky return on money saved, if interest rates were let to rise to a natural level above inflation, this ponzi scheme would collapse.

    2) There were deficits in the national budget each year even then, but the \$1 Trillion debt (vs. \$28 Trillion today) was 30% of GDP vs. 120% now. Net interest as a share of US Government outlays (from the pie charts in the 1040 tax book instructions .pdf) are 7%, but that’s at an interest rate of 1.1%! Imagine if interest rates go to 7% or, 15%!


    * He died about 2 years ago.

    • Agree: Mark G.
  4. anon[451] • Disclaimer says:

    The criminal syndicate (FED) one of the main purpose was to have world wars. There were no world wars before 1913.

  5. I see Biden has been busy, signing away another trillion, half will be gone by now in consulting fees and charges.

    He has also practically helped Xi hoist the Chinese flag over Taiwan.

    Yes the unelected president has been busy.

  6. BorisMay says:

    The US has been running a Ponzi scheme ever since Breton Woods, if the truth be known. It was designed to collapse from the very start while lining the pockets of the incredibly already stinking rich at the expense of the poor, the vulnerable and the weak.

    The world should have adopted Bancor to operate world trade with but the Jews (otherwise known as the USA) wanted their bread buttered on both sides with jam and cream on in abundance.

    They got their wish and now the idiots, who have been running the asylum for the last 75 years, are on their final trip to financial nirvana…known as the Great Reset, Build Back Better, or the rape of the children Epstein style by the Establishment.

    See why they chose paedo Biden for the top job? They need a committed paedo on board just in case.

    So what is it that you don’t know about Kamala Harris?

  7. Author Ron Paul obsesses about the Federal Reserve. Only at the very end does his real motive appear.

    …restoring a limited, constitutional government…

    As a genuine nutcase “libertarian” he hates Government. But there wasn’t a sign in this piece he hates Corruption.

    Federal Reserve Gets Caught Insider Trading. Zero Punishment Given

    The corruption story isn’t new, and Mr. Paul could have included it if he had so desired. The old man has such a case of tunnel vision he can’t see the forest for the trees. Either that, or he’s All Right with corruption.

    • Replies: @Achmed E. Newman
  8. @Zachary Smith

    I hate to feed a troll here, but let me put it this straight, Zach. If there were no Federal Reserve Bank, than there would also be no FED insider trading corruption. Go see Dr. Paul, and maybe he can have a look at that tunnel vision of YOURS.

    Yes, Ron Paul hates the US Feral Gov’t. Any patriotic American hates the US Feral Gov’t. What’s your point there?

  9. D. K. says:


    Well, Papa, go to bed now; it’s getting late.
    Nothing we can say can change anything now.
    Because there’s just different people coming down here now,
    And they see things in different ways,
    And soon everything we’ve known will just be swept away.


    Bruce Springsteen, “Independence Day” [“The River” LP (1980)]

  10. Yes, Ron Paul hates the US Feral Gov’t. Any patriotic American hates the US Feral Gov’t. What’s your point there?

    I assume you are the sort of patriotic American who hates the Federal Government.

    Well sir, for quite a while I’ve been wanting to ask someone like you about your vision of an Un-United States without a Federal Government.

    How will it be at the border at each of the Un-United states? Passports? Customs? Barbed wire?

    How will foreign relations of a say, a “Florida” or a “Maine” work out against nations which have not fragmented? Against smaller countries like “Rhode Island” or “Wyoming”? States with nukes vs States without them? Internal water transport when Lousiana controls the Mississippi? Dam Diplomacy when one “state” controls the water supply of another?

    Could you kindly tell me how that and more is all going to work out in yours and Ron Paul’s dream scenario?

  11. D. K. says:
    @Zachary Smith

    The dissolution of the United States of America would see the fifty sovereign states become fifty sovereign nation-states– much as the dissolution of the Soviet Union saw its composite republics become umpteen sovereign nation-states. Each former U. S. state would decide upon its own internal security, immigration policies, foreign relations, etc. International law would control many aspects of what you wonder about, and the new nations would be free to make treaties and other international compacts with other former states of the Union, along with the rest of the Family of Nations. Each of the fifty sovereign states already has its own constitution. The District of Columbia may have its choice of either its sovereignty, as a city-state, in return for its taking on all of the remaining obligations of the federal government, or, instead, of its being retroceded back into the sovereign state of Maryland. The Navy’s fleet and the nuclear arms of the federal government can be disposed of at international auction, with Coast Guard’s fleet being auctioned of to the former states of the Union– a Union that has long since outlived its usefulness, to either its composite states or its hundreds of millions of citizens.

  12. @Zachary Smith

    No, troll, read harder. “The US Feral Gov’t” That’s what we have now. Patriotic Americans support the Federal Gov’t as specified in the US Constitution (see Amendment X especially). We, the States, COULD take care of borders, but note that the Feral Government is not even doing THAT most fundamental of functions. Really, passports? Those hundreds of thousands of “refugees” coming in from the south each month “don’t need no steeenking passports, Senor!”

    The Federal Gov’t was created for some basic functions, but as, D.K. writes, much of that can be done ourselves without the Feral Beast interference and control of the money. Plenty of agreements have been reached between/among the various States, and in the internet age, that is even easier.

    We are so far now from the Federal Gov’t as specified and kept under control for arguably 150-175 years, but people like yourself are too damn dense to see it for what it is, Totalitarianism. But don’t worry, Scro, there are lots of tards out there like you living really kick-ass lives … My ex-wife … tarded… she’s a pilot now.

    I would explain more about the powers that have been usurped by the Feds from the States, but then I thought “hey, why doesn’t this guy just read a bunch of Ron Paul columns? Wait a minute, he is commenting under them, so what the … ?” Really, Zach, are you actually READING what Ron Paul writes, or are you just here to disparage it with no understanding?

    If reading is too hard for you, watch some of his Liberty Report videos. No, sorry, they are not cartoons, but still, give them your best shot. If you’re not careful, you might learn something.

  13. Didn’t realize you had your own personal vocabulary.

    Thanks for clearing that up.

  14. @Zachary Smith

    The ‘libertarian’ favours the war of all against all, the ‘bellum omnium contra omnes’, because it encapsulates their hatred of others, and their deluded belief that, being the least empathic or compassionate, they will come out on top, and lord it over all the ‘losers’.

  15. The Fed’s policies have succeeded wildly, in their true purpose-shoveling money to the rich parasites.

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