Ron Paul: "Blame The Fed For The Financial Crisis"

Tyler Durden's picture

An OpEd from the only sane person in Washington, written for the Wall Street Journal

Blame the Fed for the Financial Crisis

The Fed fails to grasp that an interest rate is a price, the price of time. Attempting to manipulate that price is as destructive as any other government price control

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.

The great contribution of the Austrian school of economics to economic theory was in its description of this business cycle: the process of booms and busts, and their origins in monetary intervention by the government in cooperation with the banking system. Yet policy makers at the Federal Reserve still fail to understand the causes of our most recent financial crisis. So they find themselves unable to come up with an adequate solution.

In many respects the governors of the Federal Reserve System and the members of the Federal Open Market Committee are like all other high-ranking powerful officials. Because they make decisions that profoundly affect the workings of the economy and because they have hundreds of bright economists working for them doing research and collecting data, they buy into the pretense of knowledge—the illusion that because they have all these resources at their fingertips they therefore have the ability to guide the economy as they see fit.

Nothing could be further from the truth. No attitude could be more destructive. What the Austrian economists Ludwig von Mises and Friedrich von Hayek victoriously asserted in the socialist calculation debate of the 1920s and 1930s—the notion that the marketplace, where people freely decide what they need and want to pay for, is the only effective way to allocate resources—may be obvious to many ordinary Americans. But it has not influenced government leaders today, who do not seem to see the importance of prices to the functioning of a market economy.

The manner of thinking of the Federal Reserve now is no different than that of the former Soviet Union, which employed hundreds of thousands of people to perform research and provide calculations in an attempt to mimic the price system of the West's (relatively) free markets. Despite the obvious lesson to be drawn from the Soviet collapse, the U.S. still has not fully absorbed it.

The Fed fails to grasp that an interest rate is a price—the price of time—and that attempting to manipulate that price is as destructive as any other government price control. It fails to see that the price of housing was artificially inflated through the Fed's monetary pumping during the early 2000s, and that the only way to restore soundness to the housing sector is to allow prices to return to sustainable market levels. Instead, the Fed's actions have had one aim—to keep prices elevated at bubble levels—thus ensuring that bad debt remains on the books and failing firms remain in business, albatrosses around the market's neck.

The Fed's quantitative easing programs increased the national debt by trillions of dollars. The debt is now so large that if the central bank begins to move away from its zero interest-rate policy, the rise in interest rates will result in the U.S. government having to pay hundreds of billions of dollars in additional interest on the national debt each year. Thus there is significant political pressure being placed on the Fed to keep interest rates low. The Fed has painted itself so far into a corner now that even if it wanted to raise interest rates, as a practical matter it might not be able to do so. But it will do something, we know, because the pressure to "just do something" often outweighs all other considerations.

What exactly the Fed will do is anyone's guess, and it is no surprise that markets continue to founder as anticipation mounts. If the Fed would stop intervening and distorting the market, and would allow the functioning of a truly free market that deals with profit and loss, our economy could recover. The continued existence of an organization that can create trillions of dollars out of thin air to purchase financial assets and prop up a fundamentally insolvent banking system is a black mark on an economy that professes to be free.

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Ripped Chunk's picture

WSJ is now a rag like all Murdoch pubs. I won't even wrap fish in it now.

Seize Mars's picture

Go Ron! The only guy simply telling the truth.

Joeman34's picture

Which is why TPTB cannot/will not allow him to be elected as President.  It's a shame the vast majority of American's are too stupid to understand Dr. Paul is exactly the kind of politician we need...

buzzsaw99's picture

the east coast joo banksters are invincible.

Joeman34's picture

stereotyping belies intelligence...

buzzsaw99's picture

stereotype my ass. the federal reserve is like 90% joos.

Joeman34's picture

You are correct.  It's just that I cringe every time discourse dissolves to racial brick-throwing... 

anony's picture

Why cringe?  The truth is always unpleasant, but that's because no one else will talk about the racial dominance of tiny minority worldwide, over every financial organization in the United States and the world.  

Troll Magnet's picture

Jews (and Christians and Muslims and Buddhists and other religious groups) are not a race, so there's no race-baiting here.  Anti-semitism was coined to make people feel guilty and that's it.  I don't know why Jews get that special treatment.  

Andy_Jackson_Jihad's picture

Ashkenazi jews should be a race as they have historically been extremely exthnocentrist in their "host" countries.  This explains their statistically higher IQ as well as higher instances of specific diseases.  If thats not a race I don't know what is.  2000 years ago I'd agree with you but a few hundred generations of a different culture moving around the planet have in fact created a different race.  Other broad religous sects aren't as "tight" with eachother so their traits are more correlated with geography.  That religion is not race is a farce when discussing this group.  To make discourse more accurate, someone should come up with a PC term for "nose n1gger" then we'd all know what to call them.

optimator's picture

"If you can't talk about someone they own you".

Dr. Richard Head's picture

Many bankster thieves are indeed Jewish, but not all Jewsish people are bankster thieves.  You know the whole square/rectangle shit.  Clean up your act buzzsaw.  Your tirades exposure your ignorance.

anony's picture

ALL the key financial posts in the United States and England are headed by jews. 

If you doubt it, then your ignorance far exceeds anyone you point to. Try changing the context on someone else.

i-dog's picture

Firstly, the key financial posts are not the front men, the hofjuden, that you see in the headlines. They are policy implementers, not policy makers. Even Soros needs to check with others that he is not about to tread on the wrong toes.

Secondly, the key financial decisions are taken in secret meetings and passed down to those salaried (and easily/quickly replaced) hofjuden. Ask Dick Fuld and Bernie Madoff.

Thirdly, a great percentage of people with jewish names -- particularly in the banking world -- are not, in fact, [orthodox] jews, but Sabbateans - ie. luciferians that are in league with the Jesuits, Masons and Mormons through the secret societies. They are just as keen on wiping out the religious jews as you obviously are.

Stop watching the magician's right hand. It is just an illusion.

Conax's picture

"Even Soros needs to check with others that he is not about to tread on the wrong toes."


“Since I entered politics, I have chiefly had men’s views confided to me privately. Some of the biggest men in the U.S., in the field of commerce and manufacturing, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it.” ~ POS Woodrow Wilson 

i-dog's picture

That's a very good documentary for others to see! (I must watch it again...haven't seen it for at least 3 years and will be interested to see what I think of it now, with all I've learned in the meantime :-)

I also highly recommend: and, more particularly, his book: 'Vatican Assassins III'. He's prone to religious hyperbole (I'm an atheist and just ignore it), and occasionally confusing correleation with causation, but it's impeccably researched, includes source documents, and is very accurate.

anony's picture I'm not keen on wiping out religious jews. I am referring to only secular ones in the Financial community.

I am keen on assasination of Fuld, Madoff, Blankfein, and the others whose names are never mentioned ALONG with their consiglieres like Hank Paulson, and Neil Kashkari.

But to the larger point that I had not known about, the Sabbateans.  And the coincidence of interests that brings together the jesuits, masons, mormons, and their secret societies.

Thx for heads up.

whstlblwr's picture


It's off top of my head, but sure plenty more. And why does it matter if Jew or not. You care if don't believe Jesus?


Corporations who control world are BIG OIL and BIG PHARMA, wonder what religion they believe in?

But they have their men in place, their product ready to go for President. Now that they don't have to report campaign donation they easily buy our President. Shhhhh. But they show selves during debate with advertising!

anony's picture

Treasury?? Geithner?  He's, what, Sicilian?

Corporations are also Goldman Sucks, which has derivatives in the tens of Trillions of dollars.

Name one corporation with that kind of leverage? 

I'm not necssarily talking about financial institutions, but Financial Nexus like the CFTC,  the IMF (Strauss-Kahn), Trasury, the Rotchschild's control of the U.K and tne Continent.'s picture

Mises, Rothbard and Rand were Jewish. Oh, and Groucho, too.

buzzsaw99's picture

i clearly wrote "joo banker" dick head. take your strawman out back and give it a good fucking the way joo bankers do the rest of the gentile world.

anony's picture

Bobby Rubin, Alan Greenspan, Larry Summers, Dick Fuld, Bernie Schwartz, Bernie Madoff, Gary Gensler, Strauss-Kahn, Mary Shapiro, Peter Orszag, Timmay Geithner, Ben Bernanke, Larry Fink, Ace Greenberg, Lord Blankfein, and on and on and on.....every single one jew.... were saying......

"Any man who admits to nothing but what must be be plainly demonstrated, may be sure of nothing but perishing quickly."


Fake Jim Quinn's picture

Hank Paulsen, John Corzine, Ken Lewis, Brian Moynihan, Christine LaGarde, Jamie Dimon, Vikram Pandit


anony's picture

LaGarde's mother is Jewish, get your nationalities straight.

And I didin't list them all. I have another 100 if you care to read them, but I assure you that the jews are running the global financial cabal strictly for their benefit. They are at evey key financial nexus in the world.




Smithovsky's picture

looks like the hitler youth have crawled out of their double wides again

Smithovsky's picture

wow - 8 green, 4 red.  'nuff said about ZH, I guess

i-dog's picture

Wow - 12 votes interpreted as representative of 30,000 readers! You must be a Democrat.

Smithovsky's picture

Yes, because the world consists only of Americans and therefore only of the always-right [insert own] party, and the always wrong [insert the other] party.


MrPike's picture

Joe sixpack read the title and skipped to sports.  Nothing to see here.

anony's picture

Joe, at least recgonizes a do-nothing bullshitter when he sees one, which makes him one hell of a lot smarter about what is important and what isn't than you are.


Truffle_Shuffle's picture

I tend to refrain from name calling're a tool.

anony's picture

You are a perfect RonPaulian thinkking that WORDS actually mean something and actions are useless.

You can call me anything you want, as long as you understand that all Paul has are words, and NO ACTION!



redpill's picture

What actions, as a Congressman, has he not taken, that you think he could have that would have had any impact on the status quo?

MrPike's picture

Don't feed the troll redpill, starve the beast...

iDealMeat's picture

Call in ALL Board members of the FED and TBTF banks individually.. 

Depose them publicly under oath. Make them understand that there are prison terms for any misinformation.


redpill's picture

Many of the heads of the TBTF banks have already testified, and of course they lie anyway.  What do you think, they are going to come clean because Ron Paul asks them a question?

iDealMeat's picture

Some are not good at lieing. Someone would slip up..

optimator's picture

interview individually, record them, oh, and make sure they're hooked to a polygraph.

SpeakerFTD's picture

What exactly he is supposed to do besides sponsor legislation like Audit the Fed and vote no on everything else?  Throw a molotov cocktail through the front door of 33 Liberty?

redpill's picture

That's an awesome visual :)


Temporalist's picture

Actually it would be quite shocking if RP makes as a final statement getting arrested for doing something like that.  To my knowledge he's never broken the law.

Andy_Jackson_Jihad's picture

"You are a perfect RonPaulian thinkking that WORDS actually mean something and actions are useless."

This right here perfectly summarizes the difference between a member of the tribe and an scotch/irish cracker goy debt slave.

The wise banksters use words to poison the minds of many and write laws while the wise crackers perform one act and get thrown in jail by the less-than-wise crackers that just want a paycheck and watch TV,

Libertarian777's picture

I'd take Ron Paul's 'inaction' over bush's Iraq 'action', obama's 'Libya' action, the fed's monetizing debt 'action', the tarp 'action' any damn day of the week.

Ron Paul is all about government INACTION. It is you the individual who has to take action, not have action mandated to you by government, like Obamacare.