Guest Post by Ron Paul
Last week, the Federal Reserve responded to Wall Street’s coronavirus panic with an “emergency” interest rate cut. This emergency cut failed to revive the stock market, leading to predictions that the Fed will again cut rates later this month.
More rate cuts would drive interest rates to near, or even below, zero. Lowering interest rates punishes people for saving, thus encouraging consumers and businesses to spend every penny they make. This may give the economy a short-term boost. But, it inhibits long-term economic growth by depleting the savings necessary for investments in businesses and jobs. The result of this policy will be more pressure on the Fed to indefinitely maintain low interest rates and on the Congress and president to create another explosion of government “stimulus” spending.
Boston Federal Reserve President Eric Rosengren has suggested that Congress allow the Federal Reserve to add assets of private companies to the Fed’s already large balance sheet. Allowing the central bank to buy assets of, and thus assume a partial ownership interest in, private companies would give the Federal Reserve even greater influence over the economy. It could also allow the Fed to advance a political agenda by, for example, favoring investment in “green energy” companies over other companies or refusing to purchase assets of retailers who sell firearms or tobacco products.
Mr. Rosengren’s proposal to allow the central bank to “invest,” in private companies seems like something one would hear from democratic socialists like Senator Bernie Sanders. This is not surprising since the entire Federal Reserve system is a textbook example of socialism.
The essence of socialist economics is government allocation of resources either by seizing direct control of the “means of production” or by setting prices business can charge. Federal Reserve manipulation of interest rates is an attempt to set the price of money. Federal Reserve attempts to set interest rates distort the signals sent by the rates to investors and business. This results in a Fed-created boom, which is inevitably followed by a Fed-created bust.
Economic elites benefit when the Federal Reserve pumps new money into the economy because they have access to the money created before there are widespread price increases. Artificially low interest rates also facilitate the growth of the welfare-warfare state.
The Federal Reserve’s inflationary policies harm the average American by eroding the dollar’s purchasing power. This forces consumers to rely on credit cards and other forms of debt to maintain their standard of living. Many Americans are unable to afford their own homes because they are saddled with student loan debt that can even exceed their income.
Since the bailouts of 2008, there has been a growing understanding that the current system is rigged in favor of the elites and against the average American. Unfortunately, popular confusion of our system of Keynesian neoliberalism with a free-market economy, combined with a widespread entitlement mentality, has led many Americans to support increasing government control of our economy.
The key to beating back the rising support for socialism on both the left and right is helping more people understand that big government and central banking are the cause of their problems and that free markets in all areas — and especially in money — is the solution. It is important that the liberty movement put pressure on Congress to cut spending and rein in or, better yet, end the Fed.
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The mandates of the FED are maximum employment and a stable currency. Both have been epic failures by the FED. I’m sure they are already “buying” stock, which they are prohibited from doing. The very thought of them “buying” stock is an outrage and wholly immoral. They can press a few keys on a computer and poof…buy GM. That is outrageous. We work for our currency. For it to retain any value the FED must be prohibited from doing this or they will own everything at no cost to them and complete devaluation of the dollar for us.
The thought alone is fuking crazy but through the ESF ( EXCHANGE STABILIZATION FUND) you can bet they’re doing it.
Ron, you can stop talking now.
Thank God for the Federal Reserve.
If the music stopped right now, I’d rather be an American in the USA than a “Chinamen” or anyone else anywhere else.
The Americans that do not have live off Wall Street have been going backwards while the “Investors” enjoy the good life provided by the FED’s printed money and policies that keep the rich rolling in Dough. This government will take food from Workers before it lets the FSA miss a meal. This system will bring Hyper-inflation that destroys the working class first and it’s going to hurt us but we’ll have the pleasure of knowing that many of the rich and the FSA will eventually suffer too.
It’s socialism for the rich and the poor. It’s feudalism for the rest.
It’s socialism for the Jews, and slavery for everyone else.
Today’s massive drop in the Dow indicates that the speculators (nearly all market participants; “investors” are so olden times) are getting cold feet. Not surprising, given equities valuations. Momentum “investing” may take on a whole new meaning and a different direction. Lots more than numbers on a screen could be wiped off the map this time around.