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Bloomberg News recently solicited advice from Argentinians who lived through that country’s high inflation on how Americans should cope with rising inflation. The Argentinians suggested Americans spend their paychecks as fast as possible to avoid future price increases. They also suggested taking out loans that can be paid back later in devalued currency.

These strategies may make sense for individuals. However, encouraging debt and discouraging savings is disastrous for the country. Relying on debt and spending one’s paycheck immediately encourages people to seek instant gratification instead of planning for the future. This depletes both economic and moral capital.

November’s 9.6 percent increase in the producer price index, combined with the consumer price index’s increase to levels not seen since the early 1980s, shows why fears of inflation have become the public’s number one concern. Even the Federal Reserve has acknowledged that inflation is not just “transitory.”

The Fed recently announced it is accelerating the timetable to reduce its monthly purchases of Treasury and mortgage-backed securities. The Fed also announced it is planning three interest rate increases next year. However, the Fed plans to increase rates by no more than one percent. So even if the Fed does follow through on its promise to hike rates, it will do little if anything to combat rising prices. If the Fed allowed interest rates to rise to anything approaching market levels, it would make the federal government’s debt servicing costs unsustainable. This puts tremendous pressure on the Fed to maintain low rates.

The biggest victims of the Federal Reserve’s erosion of the dollar are lower- and middle-class Americans whose paychecks do not keep pace with the Fed-caused price increases. Yet many progressives still cling to the fallacy that average workers somehow benefit from continued dollar devaluation.

Progressives are even pushing the Fed to increase its money printing and regulatory activities to fight climate change and racism. Federal Reserve Chairman Jerome Powell has embraced this “woke” monetary policy. President Biden’s reappointment of Powell and nomination of current Fed board member Lael Brainard (who is seen as more committed to a woke Fed than Powell) for vice chairman suggests the Fed will double down on this toxic mixture of cultural Marxism and so-called modern monetary theory.

Recent polls show Americans expect continued large price increases. This indicates we may be on the verge of what Ludwig von Mises called a “crack-up boom.” A crack-up boom occurs when the general population realizes that constant currency depreciation is a feature, not a bug, of central banking. This leads people to seek alternatives to government-issued currency and to factor rising prices into their plans. The crack-up boom will likely extend overseas as more countries reject the dollar’s world reserve currency status. This rejection will be driven by a combination of concern over America’s growing debt and resentment of America’s hyper-interventionist foreign policy.

Crack-up booms have historically facilitated the growth of authoritarian political movements. However, this is not inevitable. If those of us who know the truth spread the ideas of liberty to enough people, we may be able to move through the crack-up boom to a rebirth of liberty, peace, and prosperity. Steps in this direction include convincing Congress to cut spending, legalize competing currencies, and end the Fed.

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

    I can’t help but suspect that the over 100-year-old Fed, like almost every other organization that old, is now filled with relatives and affirmative action hires who are clueless at how to do their jobs. The Fed has to begin tightening and raising interest rates. 2 to 3 years and they could get a handle on this thing. Go back to the lessons learned from the Great Depression and the stagflation of the 70s. Otherwise we’ll be lucky if we end up like Argentina.

    Of course, the Fed should just be shut down and we should return to a metals-based currency, but that train seems to be a long way from the station.

  2. @Rich

    If we could abolish the dual mandate and just get the Fed back to being a “banker’s bank” it would be a huge help. Unfortunately, as you note, the train has long since left the station so the correction that will happen will involve a lot of pain.

    • Agree: Rich
  3. Just me says:
    @Rich

    “The Argentinians suggested Americans spend their paychecks as fast as possible to avoid future price increases. They also suggested taking out loans that can be paid back later in devalued currency.”

    And this is bad advice how? Go ahead and save 10% of your after tax earnings, while inflation eats up 9.6 percent of that while earning 1% interest which will also be taxed.

    • Agree: follyofwar
    • Replies: @Achmed E. Newman
  4. Steps in this direction include convincing Congress to cut spending, legalize competing currencies, and end the Fed.

    None of that will ever happen. Our mission, should we choose to accept it, is to remove ourselves from the jurisdiction of the corrupt Central Government.

    • Agree: follyofwar
  5. gay troll says:

    The Federal Reserve is the mechanism by which foreigners own the United States and all of its economic output.

  6. Jokem says:

    Buy precious metals. Silver, Gold, Platinum. Even cheaper ones like Nickel and Copper.
    That won’t work for those with a minimum of disposable income.

    • Agree: Bro43rd
    • Replies: @Bro43rd
  7. Levtraro says:

    Crack-up booms have historically facilitated the growth of authoritarian political movements. However, this is not inevitable. If those of us who know the truth spread the ideas of liberty to enough people, we may be able to move through the crack-up boom to a rebirth of liberty, peace, and prosperity. Steps in this direction include convincing Congress to cut spending, legalize competing currencies, and end the Fed.

    Essentially, you are expecting the collapse of the current economic system and hope that after the dust has settled the country and Congress will still be there to lead a civil re-birth, to have a born-again non-authoritarian nation. Good luck with that, and I truly mean it, no sarcasm, good luck with that.

    • Replies: @mulga mumblebrain
  8. Anon[388] • Disclaimer says:

    Thank you Dr. Paul

  9. Ethics is entirely situational. Bastiat in his “The Law” says that a legal system usually starts out protecting labor (productive effort and private property) against plunder (theft, robbery, exploitation, etc.) Eventually the law tends to become corrupted by special interests. Instead of the law punishing private plunder, the law is used as a means to plunder. It may be the few exploiting the multitude, or the many the few, or all against all.

    Regrettably, most of the world lives in a time where plunder is more profitable than labor. Is it any suprise that when the producer is punished and the looter is venerated, that we get more of the latter?

    Nietzsche wasn’t known for economic views, but he was a master on the darker sides of human nature. He’d call this an “inversion of values.” We are well on the voyage to oblivion, decadence, or nihilism.

    • Thanks: Mark G.
  10. we may be able to move through the crack-up boom to a rebirth of liberty, peace, and prosperity.

    This is a fantasy.

    When people’s money becomes worthless, the last thing they will concern themselves with is “liberty”.

    They will look for a leader who can get them out of this mess.

    • Replies: @Jokem
  11. torchman says:

    There is nothing remotely “Marxist” in any part of the US, the best we have are Socialist institutions like the USPS, Public libraries, Public schools, Public parks, and the military. Look up the definition of “Socialism”. “Cultural Marxism” was a recognition by some Marxist academics that Marxism was unlikely to come about through violent revolution and that Marxism should be promoted through debate and other non-violent political means. You might also inform yourself about “Critical Race Theory” (Wikipedia has a good entry on it) since most critics seem to think it is just codified hatred of White people

    • Replies: @Jokem
    , @Rich
  12. Thanks for another great column, Dr. Paul. Your part about Argentina and how Americans should handle inflation has already been personal for me.

    I can see the logic in borrowing, especially at the 3-4% rates they may give for a HELOC or what-have-you, in order to use that money for hard assets now. We have assets we could use to borrow quite a bit. My problem is just what you stated OUGHT TO be our attitude as Americans. I hate owing anyone money. For over 20 years now, I haven’t. I also don’t relish the process, giving out all the info, etc. to bureaucratic bank personnel.

    I wrote “ought to” because it’s unfortunate that most Americans have no problem with owing anyone for anything. That’s not who Americans were long ago. I’m guessing the financial crowd is very proud of having caused this change.

  13. @Just me

    Even if rates were to go up to that 9.6% to match 9.6% inflation, you lose. Yeah, you pay whatever your marginal rate is to the feds, your State, and maybe even city, on that 9.6%. I’m not arguing, as you probably know this, but the REAL interest rate, the nominal rate – inflation, ought to be let to reach its market value, the “price of money”.

    Finally, the commenter Rich didn’t write your quoted excert. I agree with Ron Paul that handling things the Argentine way is not the way it should be, but is it worth losing one’s individual ass to try to save the collective ass of those who are debt-slaves and far beyond understanding anything Ron Paul has ever written?

  14. Finally, for those who point it out here, Dr. Paul almost always puts in an optimistic conclusion to his columns. (“We just gotta spread the word.”, etc…) I don’t agree, and I am not sure Ron Paul understands that we don’t have the same Americans as in the time of Barry Goldwater.

    • Replies: @Jokem
  15. Thomasina says:

    The Fed and the ruling elite have been desperately trying to manufacture inflation for years now. By continually lowering the interest rates (and big corporations get to borrow for next to nothing), they have essentially bailed out every debtor who bit off more than they could chew. Corporations who took on too much debt were rewarded with lower interest rates. They rolled their debts over, and then stupidly took on more debt. This assured that asset prices remained high.

    With all this intervention, it wasn’t surprising to see that trouble again appeared in the repo market in the fall of 2019, and the Federal Reserve rushed in and started their pumping again in order to save the banking system.

    Then conveniently and mysteriously Covid came along, almost as if it was pulled off a shelf. They needed Covid. Some say they invented it for the sole purpose of handing out virtually “free money” to anyone who could breathe. These “breathers”(who didn’t have to pay their rent or mortgages) then turned around and spent their money as fast as they got it. And PPE is a joke; many got hundreds of thousands of dollars and never lost a day of work. Some of these people bought new trucks and some bought real estate.

    And voila, demand was created with all of this cheap credit and free money. Is it any surprise that supply can’t keep up? When supply doesn’t satiate demand, then prices will rise. Gee, who would have thunk it?

    All engineered. Come on, Dr. Paul, call them out.

    • Replies: @PJ London
  16. I don’t get this advice. I guess it works if you have a lot of money to fool around with.

    But if you spend what little money you have money now, then that’s it. No more money. If you have a little bit saved, it’s hard to give it up. Basically, save it or spend it, regular people are fucked.

  17. Bro43rd says:
    @Jokem

    Best to compliment those precious metals with iron(or plastic composite if glock is your type), copper & lead.

  18. Jokem says:
    @Neuromancer

    ‘They will look for a leader who can get them out of this mess.”

    Adolph Hitler

    • Replies: @Not Important
  19. Jokem says:
    @torchman

    ‘There is nothing remotely “Marxist” in any part of the US, the best we have are Socialist institutions like the USPS, Public libraries, Public schools, Public parks, and the military.’

    Socialism Is Marxism in it’s rudimentary form.

    ‘critics seem to think it is just codified hatred of White people’

    Which it is…

  20. Jokem says:
    @Achmed E. Newman

    I agree Achmed, it has gone too far to be reversed, short of a complete economic collapse.
    The exception might be if technological advances go fora enough to where resources become cheap enough to where we end up in a TNG universe where energy and materials are so abundant as to be a minor issue.

  21. Rich says:
    @torchman

    Most critics recognize “crt” for what it is, pure, anti-White hatred. You can try to pretty it up and spray all the Old Spice cologne you can get your hands on, onto it, it’s still completely obvious what it is. I can’t help but be amused wondering if those of you who pretend “crt” isn’t ridiculous in its scholarship, false in its premises and obviously the work of White haters, are too ignorant to see it for what it is, or think everyone else is too stupid to see it plainly for what it is. You aren’t fooling us. Sorry, comrade.

    • Agree: Achmed E. Newman, Rurik
  22. PJ London says:
    @Thomasina

    The money pumped prior to 2020 had virtually no effect on consumer inflation.
    It had a huge effect on investor inflation, it had a huge effect on property inflation, it had a huge effect on financial organisation’s balance sheet inflation, but this was held in tight and never distributed to consumers.
    The latest money creation was distributed directly, via welfare, to consumers. In addition, the production was curtailed through lockdowns and supply dropped just as demand was being pumped with ‘free’ money and that is why consumer inflation is growing.
    There is a major problem with Dr Paul’s advice. He is assuming that some form of ‘normality’ or market is going to prevail. What if everything changes?
    The BIS can instruct the Fed to implement Basel IV and restrict the commercial bank’s ability to offer credit. This is what happened (by prearranged plan) in 1929 and this is what destroyed Japan in the 90s.
    Then in place of increased inflation, you get deflation or at best stagflation, in either event you as an individual are destroyed. If this scenario (which I personally believe is the most likely) then your only safety net is cash. Not gold, not silver as these can be outlawed by promulgation.
    Even cash is problematic noce the government is involved, they can simply announce that a maximum of (say) \$1,000 is the maximum permitted and anything above that is forfeit at a rate of \$1 “New” for every \$10 “old”. Happened hundreds of times. Americans did it to the West Germans 1948 hence the Russians built the Wall (two weeks later) to protect the East Germans. Remember Cyprus?

    Quigley wrote of this international banking network:
    “[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.”
    “The BIS is where all of the world’s central banks meet to analyse the global economy and determine what course of action they will take next to put more money in their pockets, since they control the amount of money in circulation and how much interest they are going to charge governments and banks for borrowing from them. . . .
    “When you understand that the BIS pulls the strings of the world’s monetary system, you then understand that they have the ability to create a financial boom or bust in a country. If that country is not doing what the money lenders want, then all they have to do is sell its currency.”
    The power of the BIS to make or break economies was demonstrated in 1988, when it issued a Basel Accord raising bank capital requirements from 6% to 8%. By then, Japan had emerged as the world’s largest creditor; but Japan’s banks were less well capitalised than other major international banks. Raising the capital requirement forced them to cut back on lending, creating a recession in Japan like that suffered in the U.S. today. Property prices fell and loans went into default as the security for them shrivelled up. A downward spiral followed, ending with the total bankruptcy of the banks. The banks had to be nationalised, although that word was not used in order to avoid criticism. …”

    And the Japanese people lost their savings and most of their property, but they had a “Nationalism” that is entirely missing in the USA and therefore the USA will not recover as did Japan.
    The system has the means (ie the guns of the police) to take it all and no matter which way you turn they have an answer that gives everything to them and leaves you with nothing.

    Hope and pray that it is greed and incompetence that brought us to this state and not malice. If there is a conspiracy then it has won, and all of us have lost, irrevocably.

    The AMERICAN HEBREW, leading Jewish newspaper in the United States, in its September 10, 1920 edition said: “The Bolshevik Revolution in Russia was the work of Jewish brains, of Jewish dissatisfaction, of Jewish planning, whose goal was to create a NEW WORLD ORDER. What happened in Russia, shall also, through the same Jewish mental and physical forces, become a reality over all the world.”
    Authentic records show that during the opening days of this Jewish Revolution, 31 bishops, 1,650 priests and ministers, and over 2-million Christian laymen, were murdered under Jewish control. (Not including the Czar and his family who were brutally murdered by Jewish assassins.)
    ”This was the beginning of the wholesale slaughter of over 8,000,000 Russian Orthodox Christians from 1918 through 1943″

    • Replies: @Thomasina
  23. Off topic: Instead of verbal ripostes with Fraudci, ARREST THE BASTARD.

  24. Rurik says:
    @Rich

    I can’t help but suspect that the over 100-year-old Fed, like almost every other organization that old, is now filled with relatives and affirmative action hires who are clueless at how to do their jobs.

    the minions like Powell or Yellen don’t make critical decisions. The last Fed Chairman who likely had any autonomy with decisions was Greenspan, and I suspect even he had to run any big decisions by Rothschild and co. before getting the green light.

    The Fed/ECB is the means by which they rule the Western world, and beyond. It is their ‘Eye of Mordor’, out of which emanates their nefarious power over their respective vassals in DC, London, Paris, etc..

    They would never entrust such power to some appointed apparatchik.

    If the Fed decides to lend a few trillion to some consortium of Asian banks, then that is going to come with a lot of strings, that will all be haggled over in conversations that are as removed from the public eye as the pope’s trysts with little boys.

    Go back to the lessons learned from the Great Depression and the stagflation of the 70s

    The Fed caused the Great Depression. They caused stagflation and the S&L mass looting and the 2008 housing bubble global economic catastrophe – so they could buy up real assets at pennies on the dollar. ‘Such a deal!

    They are not in it to benefit the U.S. economy or protect the value of the dollar or any of their other stated charters. Those are all lies. They laugh about that shit while doing the opposite.

    The Fed is in it to benefit the tiny few who own and use the banking system to enrich themselves and a few minions, control governments and all powerful institutions, foist wars and destroy civilizations.

    It wasn’t Obama or Hillary Clinton who made the decision to torture/lynch Gaddafi and plunge Libya and Syria into dystopian hells on earth. That decision was made by the owners of the Fed/ECB, and Obama and Hillary, (like Bush and Merkel and Macron – and whatever treasonous rat happens to be residing at 10 Downing St.) were/are simply stooges who were selected because it was known that they would do whatever they were told to do.

    The Fed/Rothschild is the power behind it all. When the beleaguered citizens of North America and Europe all wonder why their governments all intact policies that are anathema to the well-being of their nations and peoples, and even genocidal for their progeny, the reason they have zero idea who is behind their collective demise is because that kind of pall over any open discourse is a central operating feature of the Federal Reserve Banking system, that controls the money supply of the Western world and beyond, and uses that power to cloak its very existence.

    Right now, as they’ve decided to inflate the currency at alarming rates, it’s all calculated to their benefit.

    Perhaps they see too many people holding on to their cash, and for whatever reasons, they consider such prudence to be inconvenient to whatever schemes they have up their sleeves for their next mass-looting, or war(s), or nations slated for the next plunge into a dystopian hell on earth, or all of the above.

    So they inflate the currency at alarming levels, to get people to spend their cash, before it’s reduced to so much worthless paper under their bed.

    It all works towards crushing the working and middle class, creating poverty and dependence on government, all of which gives them more and more and more power. What’s not to like?!

  25. Thomasina says:
    @PJ London

    “Hope and pray that it is greed and incompetence that brought us to this state and not malice. If there is a conspiracy then it has won, and all of us have lost, irrevocably.”

    While I don’t think it’s incompetence, I can’t make up my mind on whether I think it’s just plain greed or whether it’s malice. The central banks appear to be on the same page, but are they colluding to save the system so they can fleece it a little bit longer (can’t see this as they’ve already got billions) or are they steering (which is what it feels like) us towards a whole new game? The way the monopolies are forming around us (not to mention the surveillance, censorship, etc.), it really makes you wonder, doesn’t it?

    Thanks for your great post.

  26. hillaire says:

    isn’t ‘ron paul’ a jew that plays controlled opposition for jewish bankers?

    • LOL: Achmed E. Newman
    • Replies: @Bro43rd
    , @Achmed E. Newman
  27. Bro43rd says:
    @hillaire

    Definitely not, spent nearly 30 yrs in congress & didn’t take one dime from lobbyists, jewish or otherwise. Never took one of the “free” junkets to Israel. Americans missed a golden opportunity not electing him president, we were too busy proving we weren’t racist. A lot of good that did, we’re more “racist” now than ever, lol!

  28. @hillaire

    I don’t like sarcastic LOL’s, Hillaire, and have only done that a handful of times here. This is one of them.

    Bro43rd said it, but, if you think Ron Paul is not on the side of the American people, you should just give up right now. What I have noticed is that the people who use that term “controlled opposition” are usually the only people I myself suspect of actually being controlled opposition, albeit on a small, ineffective scale.

    • Replies: @hillaire
  29. Mark G. says:

    Biden is being blamed for the high levels of inflation but Trump followed the same policy of low interest rates and money printing. So, instead of just one of them being a half senile idiot, they both are. If we were going to have a really old guy as president, it’s too bad it couldn’t have been Ron Paul.

    • Replies: @Jokem
  30. Jokem says:
    @Mark G.

    Actually, I put the blame on Congress more than either president.
    The budget and monetary policy is the province of Congress more than the executive.

  31. @Levtraro

    There is no such thing as ‘liberty’. We are flesh and blood and must sicken and die, slaves to our physical and psychological beings . We live with others, whose ‘liberty’ we must respect, even if it impinges on our own. We are not even at ‘liberty’ in ourselves as we are the creation of others, by descent, socialisation and the impositions of others pursuing their ‘liberty’ to rob us of ours. My advice is have nothing and wish for nothing. The only true liberty lies beyond the grave.

    • Replies: @Levtraro
  32. hillaire says:
    @Achmed E. Newman

    I understand… you need someone to follow and respect ( a rare find nowadays)… something to believe in.. someone who says the right things at the right times.. a man of words and no action.. a political cover story.. (now that black rock is ahem, ‘auditing’ your ‘fed’ nare a peep)..

    he’ll disappoint you and let you all down, in fact if I’m not mistaken (an impossibility) and you would share a moment of honesty…..

    he already has…

    still there’s always little Randy.. a chip off the old block… He’ll make sure that the charade continues to carry the torch of ‘liberty’… and the family dynasty keeps its seat at the poker table..

    until there is no liberty ‘left’…..

    like those poor little buggers locked up in the DC gulags.. bidens bastille…

  33. Levtraro says:
    @mulga mumblebrain

    Mmmh totally disagree. I have lots of liberty, lots. Within the constraints of physical existence and given the large degree of uncertainty in values of variables and mechanisms of change, I enjoy enormous liberty to do as I want. Beyond the grave there is no liberty, beyond the grave there is nothing, as far as I am concerned.

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