Guest Post by Ron Paul
Stocks fell last week following news that the yield curve on Treasury notes had inverted. This means that a short-term Treasury note was paying higher interest rates than long-term Treasury note. An inverted yield curve is widely seen as a sign of an impending recession.
Some economic commentators reacted to the inverted yield curve by parroting the Keynesian propaganda that recessions are an inevitable feature of a free-market economy, whose negative effects can only be mitigated by the Federal Reserve. Like much of the conventional economic wisdom, the idea that recessions are caused by the free market and cured by the Federal Reserve is the exact opposite of the truth.
Interest rates are the price of money. Like all prices, they should be set by the market in order to accurately convey information about economic conditions. When the Federal Reserve lowers interest rates, it distorts those signals. This leads investors and businesses to misjudge the true state of the economy, resulting in misallocations of resources. These misallocations can create an economic boom. However, since the boom is rooted in misperceptions of the true state of the economy, it cannot last. Eventually the Federal Reserve-created bubble bursts, resulting in a recession.
So, recessions are not a feature of the free market. Instead, they are an inevitable result of Congress granting a secretive central bank power to influence the price of money. While monetary policy may be the prime culprit, government tax and regulatory policies also damage the economy. Many regulations, such as the minimum wage and occupational licensing, inflict much harm on the same low-income people that the economic interventionists claim benefit the most from the welfare-regulatory state.
The best thing for Congress and the Federal Reserve to do after the bubble bursts is to let the recession run its course. Recessions are painful but necessary if the economy is going to heal from the damage done by government’s inflate-tax-borrow-spend-and-inflate-some-more policies. But Congress and the Fed cannot resist the cries to “do something.” So, Congress spends billions on wasteful “economic stimulus” plans and bailouts of politically influential corporations. Meanwhile, the Fed tries to “prime the pump” via new money creation, restarting the whole boom-and-bust cycle.
This is not to say that no one would experience economic difficulties in a free market. Businesses and even whole industries would still close because of changing consumer tastes, new competitors offering superior products, or bad business decisions. There may even be bubbles in a free market as some investors misread fads as permanent changes in consumer preferences. But periods of downturn would be shorter, and most would only affect specific industries rather than the entire economy.
President Trump’s imposition of tariffs (which are a form of taxes on American consumers) has been particularly harmful. The tariff war has not just raised prices on imported consumer goods. It has also cut off markets for export-reliant businesses, such as manufacturers that import materials used to construct their products.
The trade dispute with China may be the event that pushes the US economy into a major recession or even a depression. However, the trade war is not the root cause of the downturn. The next recession, like every recession since 1913, will come stamped “Courtesy of the Federal Reserve.” The only way to end the boom-and-bust cycle and restore peace, prosperity, and liberty is to end the welfare-warfare state, repeal the Sixteenth Amendment, and audit then end the Fed.
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
-----------------------------------------------------
To donate via Stripe, click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)
Shilling for the DS now, Ron ?
How so? As did Adams, Jefferson, Madison, Mason, Jackson, and most of the our founders (Hamilton excepted), Paul opposes usurious, debt-based, unbacked fiat money issued by an unaccountable cartel-owned central bank. The Fed is a conerstone of the so-called deep state. It is a powerful instrument of theft, stealth taxation, debt enslavement, and global hegemony. Paul says it should be audited, then abolished. Why would this not benefit heritage Americans?
No.
Ron Paul, Pat Buchanan, and Paul Craig Robert’s columns are inevtiable.
MSM is pushing recession and Whitey bad, there’s no need for echo chambers.
My point exactly.
These writers are bought-and-paid for demoralization shills and disinformation shills working for the worst sort of dark forces.
Recessions are a feature of human nature. They are exasperated by a debt based economy. There were recessions before there was a Federal Reserve, but they were usually relatively short and minor. In addition, they did not systematically drain all the wealth from the working classes. There was a time in America when it was common for an average person to have 100+ acres of land, and their wealth was stored in gold and silver.
Today, most people do not own anything of tangible value and their wealth is stored in their ability to borrow.
They never abolished slavery, they perfected it and made it all inclusive.