Guest Post by Ron Paul
Lost in the media’s obsession with the impeachment circus last week was Federal Reserve Chairman Jerome Powell’s testimony on the state of the economy before the Joint Economic Committee. In his testimony, Chairman Powell warned that when the next recession inevitably occurs, the US Government’s over $23 trillion debt would prevent Congress from increasing spending to revive the economy.
Powell also said that the Fed’s current low interest rate policies would prevent the Fed from using its traditional methods of increasing the money supply and further lowering interest rates to jump-start economic growth in a recession. Hopefully, Powell is correct that when the next recession hits the Federal Reserve and Congress will be unable to “stimulate” the economy with cheap money and new spending.
Interest rates are the price of money and, as with all prices, government manipulation of interest rates distorts the signals regarding market conditions. Artificially low interest rates lead to malinvestment and the creation of bubbles. Recessions are a painful but necessary correction that allows the economy to cleanse itself of these distortions. When the Federal Reserve and Congress try to stimulate the economy, they introduce new distortions, making it impossible for the economy to heal itself. Fiscal and monetary stimulus may temporally create the illusions of prosperity, but in reality they merely create another bubble that will eventually burst starting the boom-and-bust cycle all over again. So, the best thing Congress and the Federal Reserve can do to help the economy recover from a recession is nothing.
Powell is the latest Federal Reserve Chair to warn of the dangers of government debt, which is ironic since the Federal Reserve is the great enabler of deficit spending. Government manipulation of the value of money allows politicians to hide the true costs of their warfare and welfare. This is why throughout history governments have sought the power to dictate what is and is not money and determine the value of the monetary unit. Today’s central bankers are the heirs of the medieval kings who shaved off the edges of gold coins, then ordered the people to pretend that shaved coins where just as valuable as unshaved coins.
Instead of shaving gold coins, today’s central bankers facilitate the growth of government by purchasing government securities in order to keep interest rates—and thus the government’s borrowing costs— low. The Federal Reserve’s interventions enable the expansion of government well beyond what would be politically palatable if politicians had to finance the entire welfare-warfare state through direct taxation or borrowing at market interest rates, which would increase interest rates for private sector borrowers, lower growth, and increase unemployment.
Since the creation of the Federal Reserve, the US dollar has lost over 96 percent of its value. The Federal Reserve-caused decline in purchasing power is a stealth tax. This inflation tax does not affect the financial elites—who receive new money created by the Federal Reserve before the Fed’s actions have diminished the dollar’s purchasing power—but has hurt middle-and-working class Americans whose purchasing power is continuously reduced by the Federal Reserve. The inflation tax is not just the most hidden, but the most regressive of taxes.
The Federal Reserve is responsible for the growth of government, the loss of liberty, the rise in income inequality, and the boom-and-bust economic cycle. All those who support liberty, peace, and prosperity should join the effort to audit and end the Fed.
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Well said Ron and of course you are quite correct. But now the MMT supporters claim that it really doesn’t matter what the level of government debt is because it is not like personal debt. – but that’s another discussion (I am of the Austrian school of economic thought.)
Perhaps the next best thing is to introduce VAT into the USA economy – that should be fun and would raise enough to pay the debt off in no time! Let me see, $20trn GDP @ UK rates of 20% – so it should only take 5 years as long as there aren’t riots in the meantime.
Food riots , “A hungry man is a dangerous man”!
We are witnessing this in every population center in America .
Yes government and federal reserve policies are at criminal fault along with the circle jerk of Wall Street to K-Street to Capitol Street elites and their well paid minions in government employ armed and otherwise . If government employees were paid salaries and benefits that the taxpayer funds could really support then police and fire , school teachers and bureaucratic paper shufflers would qualify for welfare assistance . Just like the old industry working people who have been continuously tossed overboard or under the bus for the past 40 years . Those who believe they are immune from the finality of the economic debacle that is what our American economic future will be , good luck !
Do not think as your socialist supporters in government vote to confiscate more wealth from an ever dwindling middle America to pay your benefits will continue to go unchallenged . If not by legal ballot box justice then forced street level will be the last resort !
When middle America truly awakens to that knock on the door to be evicted by an armed government minion because we chose to purchase food , energy and medical care over paying a tax on personal property so government employees retire in their 50’s while we work till we drop , that game is over !
FORGET ME NOT
Whatever they say it means the opposite. They will crush us with high taxation and inflation to rid the debt. It is the only way out unless they print money. Duh
Inflation IS printing money by definition bubba
Inflation is a tax approved by the Federal Reserve and not by Congress.
The banks depend on being paid back with inflated dollars.
End the FED,,,,,,,,
“The Federal Reserve System is not Federal; it has no reserves; and it is not a system, but rather, a criminal syndicate. It is the product of criminal syndicalist activity of an international consortium of dynastic families comprising what the author terms ‘The World Order'” – Eustace Mullins “Secrets of the Federal Reserve”
RP has been singing the same song for over three decades, don’t hold you breath that ANYTHING will change.
Controlled opposition is controlled opposition…………..
” Hopefully, Powell is correct that when the next recession hits the Federal Reserve and Congress will be unable to “stimulate” the economy with cheap money and new spending.”
You mean Keynesian pump-priming by the FED is all bullshit? Who knew? (sarc off) Quick! Someone alert Paul Krugman! This should kill him.
On another note, I was looking back and it seems that Trump has replaced at least 12 of his 16 cabinet positions since he became President. One of the four stalwarts that seems to be the most protected and safe in his position is (((Steven Mnuchin))). I’m sure it’s just a coincidence that the FED’s (((boy))) is still in charge of the Treasury.
It can get to a point and then the torches and pitchforks come out. Lots of rope also.
They will inflate until they can’t. It is their only option.
They will inflate until they destroy the value of the currency.
The FED’s mandates were based around stability of markets and stability of the currency. Well done FED.