The Federal Reserve: More Lethal than Coronavirus

Guest Post by Ron Paul

Last week the Federal Reserve announced it will keep interest rates at or near zero until the economy recovers from the government-imposed shutdown. Following this announcement, Federal Reserve Chairman Jerome Powell urged Congress and the Trump administration to put aside any concerns about the deficit and spend whatever it takes to stimulate the economy and combat coronavirus.

The Federal Reserve previously announced it would make unlimited purchases of Treasury securities, thus encouraging Congress and the president to increase spending and debt. With some members of Congress talking about another multi-trillion-dollar stimulus bill, and with President Trump proposing a two trillion dollars infrastructure plan as a way to get Americans back to work, it is obvious, and not surprising, that Congress and President Trump gleefully agree with Powell’s advice.

Increasing the purchase of federal debt is not the only action the Fed has taken in a desperate attempt to keep the economy afloat. Since the coronavirus lockdowns began in early March, the Fed has greatly expanded its balance sheet. The Federal Reserve has also launched an unprecedented program to “loan” money directly to businesses.

While some states are beginning to end the lockdowns, it may be months or even another year before all the lockdowns are finally ended. It is unlikely that the economy will completely recover after the shutdown ends.

The economy was teetering on the brink of a recession months before anyone heard of coronavirus. Last September, a panicked Fed began emergency infusions of cash into the repurchasing market, which is where banks make short-term loans to each other. The Fed’s balance sheet expansion also began in September. The Fed was also pushing interest rates down before the coronavirus panic, and it will likely keep rates at or even below zero long after the crisis related to the shutdown subsides.

Economic stagnation combined with zero or negative interest rates remove incentive for people to save. This depletes the supply of private capital available to invest in businesses and jobs. The lack of private capital will put pressure on the Federal Reserve to maintain, and even expand, its new lending programs indefinitely.

Each of the Federal Reserve’s responses to the coronavirus shutdown increases the distortions of the market caused by the Federal Reserve’s meddling with the money supply and interest rates. These increased distortions guarantee the inevitable crash will be much more severe than the current downturn. The one upside is that the next meltdown will likely lead to the end of the fiat money system and thus the end of the welfare-warfare state.

The only way to minimize the coming crisis is to begin immediately unwinding the current system. The first step is to end the lockdown and let businesses reopen and people go back to work. Congress must then begin challenging monetary policy by passing the Audit the Fed bill. Congress should also cut spending, starting with ending our hyper-interventionist foreign policy and bringing the troops home. Ending the welfare-warfare state and the fiat money system may cause some short-term pain, but that pain will be dwarfed by the long-term gains in liberty, peace, and prosperity.

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overthecliff
overthecliff

Ron Paul an honest and honorable man. It would be great to have him as a friend and neighbor. This solution is naive and to late, way to late. I don’t think Ron ‘s mind can comprehend how corrupt and evil PTB are.

Gen X Nomad
Gen X Nomad

A snowball has a better chance in Hell than the likelihood of those policy proposals being enacted. The statists are in it to win it. By hook or crook, they are going to get their Pandemic 2.0, already suggested in a recent Gates Foundation memorandum. After that, it’s going to look a lot less like historical reenactments of the American Revolution and a lot more like Bosnia.

gman
gman

bosnia had a lot fewer guns than the u.s. ….

Harrington Richardson
Harrington Richardson

I don’t think so. Tito was a real “can you see your basement floor” kind of guy. They had billions and billions of rounds stockpiled and armories full of Yugo made MG 42’s, all the com bloc weapons etc.

gman
gman

just remember – no matter how much the fed “loans”, it means you owe more.

niebo
niebo
Harrington Richardson
Harrington Richardson

One thing about Ron Paul, he follows his own advice. How has that turned out? He once said that all or most of his savings went into Gold. At this point in time with Gold at this level near $1,700 he is richer than ever assuming he still has it.

gman
gman

gold itself is not wealth. being able to purchase what you wish (however purchased) is wealth.

Harrington Richardson
Harrington Richardson

I’m willing to accept whatever limitations owning shit loads of Gold may entail.

22winmag - TBP's Corona Hoax Investigator

Give it a fucking rest Ron.

We really didn’t need to hear from you ever again after your belly-flop in the 2012 primary.

The FED was a very necessary tool in order to trap and document the last 110+ years of domestic and foreign criminals plotting to overthrow the U.S.

Gen X Nomad
Gen X Nomad

Everybody who threatens the existing order gets their “talking to.” Ol’ Dr. Paul from Brazoria County, Texas doesn’t have anything ever resembling the horsepower needed to resist that kind of pressure. PS, they tried to kill his son, and almost succeeded.

Jai Seli
Jai Seli

Yup. The PRIVATELY-held [NOT]Federal[NO]Reserve is the most egregious entity of consequence since the founding of the USA REPUBLIC!!!

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