Thursday, October 20, 2011

Why We Need to Blame the Fed for the Financial Crisis

By Ron Paul

To know what is wrong with the Federal Reserve, one must first understand the nature of money. Money is like any other good in our economy that emerges from the market to satisfy the needs and wants of consumers. Its particular usefulness is that it helps facilitate indirect exchange, making it easier for us to buy and sell goods because there is a common way of measuring their value. Money is not a government phenomenon, and it need not and should not be managed by government. When central banks like the Fed manage money they are engaging in price fixing, which leads not to prosperity but to disaster.

The Federal Reserve has caused every single boom and bust that has occurred in this country since the bank's creation in 1913. It pumps new money into the financial system to lower interest rates and spur the economy. Adding new money increases the supply of money, making the price of money over time—the interest rate—lower than the market would make it. These lower interest rates affect the allocation of resources, causing capital to be malinvested throughout the economy. So certain projects and ventures that appear profitable when funded at artificially low interest rates are not in fact the best use of those resources.

Eventually, the economic boom created by the Fed's actions is found to be unsustainable, and the bust ensues as this malinvested capital manifests itself in a surplus of capital goods, inventory overhangs, etc. Until these misdirected resources are put to a more productive use—the uses the free market actually desires—the economy stagnates.

Read the rest at WSJ.


  1. That Paul sho is smart.

  2. I agree with Ron Paul at a high level the Fed does cause these busts and booms but the Fed is charged with regulating the economy and IMHO over the past 100 years (nearly) they have overall does a decent job. While far from perfect, getting rid of the Fed I fear would potentially remove this regulating engine that has allowed us much prosperity over other nations. I still think we should elect him though. His other political ideals are very sound.

  3. The future President(we wish) lays it out in easy to understand terms. The detail he does not go into is what a truly oddball and secretive
    organization the Federal Reserve is. To have such a small group(driven by their handlers political-economic interests) with such power is incomprehensible. This body needs to be abolished, reform will not do it, and no allowance of a substitute to arise. But they will not go quietly into the night, and are circling the wagons by hiring huge private police to guard their facilities (and harrass those that take video or protest outside them). In short, the Fed is now a tool of an increasingly fascist state.

  4. Anon@1105am

    Money is a good that arises in a free market naturally. That is why gold is regarded as money throughout the world.

    Giving power to counterfeit it at will to a small cabal is dangerous and wrong. END THE FED!

  5. Hey Anon@11:42

    How anyone after reading this article can not see it, it’s beyond me. Then again, 50% of the world’s population are below average intelligence.

    ...even nuts can be used as money.

  6. @ ANON at 11:42 am

    When logic and reason are not on your side and you have no counter argument resort to name calling.

  7. The Fed will end on its own if we just have competing currency. Allow everyone to use what ever they want as money and how long do you think FRNs will last? Repeal all legal tender laws and that will do the trick.

  8. To call Paul a "nut"? Really? Have you read anything from the Founders of this country? If Paul is a nut ... then you must admit many of this country founders are also "nutty".
    I myself believe our Founders are some of the smartest men who have ever walked the earth.
    Read Richard Maybury... you may change your mind.

  9. The FED has taken us down and until we retun to silver back currency and all of the politicians are not allowed to touch the supply and demand which a silver backed dollar gives you. Also, it is no secret that the FED is a large part of the elitist and they want a one world government and we as tax payers have been paying for them to do this. I say the books of the FED should be public as well as our government.

  10. RP laid out the essence of the problem succinctly in his statement.

    If one still cannot grasp what the problem is, you're posing the question(s) incorrectly.

    This does not make RP a nut and it doesn't make the fed a good idea.

  11. Not just end the Fed, prosecute them under RICO laws. What they have done to the American people in the mortgage industry is the biggest fraudulent taking of personal property in history. This is against our 5th Amendment rights under the Constitution of the United States. If we do not stand against this the entire world will be remanded to a form of economic slavery the likes of which has never been seen in history!
    Ron Paul or no one at all!

  12. Ron Paul has managed to gain fantastic momentum in the face of the most blatant media blackout ever seen. The reason is that he tells people what is really going on in the battle for personal freedom. There is nothing worse than being the victim of treachery, which we all have, and then having those who caused the treachery in the first place pretend to be the solution to those very problems they created in the first place. Someone like Ron Paul comes along and starts pulling down the wizard's curtain, even provides a way out of the mess and those who want us to live under their financial and political thumbs go berserk.


    Yeah, what a nutjob being able to predict the exact collapse of the housing bubble while a former fed official like Cain is completely shocked.