Ron Paul: "Central Bankers Are Intellectually Bankrupt"

Tyler Durden's picture

Likely glowing from his glorious victory (h/t Trish Regan) over Krugman in Bloomberg's recent Paul vs Paul debate, Rep. Ron Paul destroys the central-planning arrogance of Bernanke and his ilk in an Op-Ed released by the FT today.

Control of the world’s economy has been placed in the hands of a banking cartel, which holds great danger for all of us. True prosperity requires sound money, increased productivity, and increased savings and investment. The world is awash in US dollars, and a currency crisis involving the world’s reserve currency would be an unprecedented catastrophe. No amount of monetary expansion can solve our current financial problems, but it can make those problems much worse.

Our Central Bankers Are Intellectually Bankrupt

by Ron Paul

The financial crisis has fully exposed the intellectual bankruptcy of the world’s central bankers.

 

Why? Central bankers neglect the fact that interest rates are prices. Manipulating those prices through credit expansion or contraction has real and deleterious effects on the economy. Yet while socialism and centralised economic planning have largely been rejected by free-market economists, the myth persists that central banks are a necessary component of market economies.

 

These economists understand that having wages or commodity prices established by government fiat would cause shortages, misallocations of capital and hardship. Yet they accept at face value the notion that central banks must determine not only the supply of one particular commodity – money – but also the cost of that commodity via the setting of interest rates.

 

Printing unlimited amounts of money does not lead to unlimited prosperity. This is readily apparent from observing the Fed’s monetary policy over the past two decades. It has pumped trillions of dollars into the economy, providing money to banks with the hope that this new money will spur lending and, in turn, consumption. These interventions are intended to raise stock prices, lower borrowing costs for companies and individuals, and maintain high housing prices.

 

But like their predecessors in the 1930s, today’s Fed governors behave as if the height of the credit bubble is the status quo to which we need to return. This confuses money with wealth, and reflects the idea that prosperity stems from high asset prices and large amounts of money and credit.

 

The push for easy money is not new. Central banking was supposed to have ended the types of periodic financial crises the US experienced throughout the 19th century. Yet US financial panics have only got worse since the centralisation of monetary policy via the creation of the Fed in 1913. The Depression in the 1930s; the haemorrhaging of gold reserves during the 1960s; the stagflation of the 1970s; the dotcom bubble of the early 2000s; and the current recession all have their root in the Fed’s loose monetary policy.

 

Each of these crises began with an inflationary monetary policy that led to bubbles, and the solution to the busts that inevitably followed has always been to reflate the bubble.

 

This only sows the seeds for the next crisis. Lowering interest rates in an attempt to forestall a recession in the aftermath of the dotcom bubble required massive credit creation that led to the housing bubble, the collapse of which we still have not recovered from today. Failing to learn the lesson of the bursting of both the dotcom bubble and the housing bubble, the Fed has pumped trillions of dollars into the economy and has promised to leave interest rates at zero through to at least 2014. This will only ensure that the next crisis will be even more destructive than the current one.

 

Not content with its failed attempts to prop up the US economy, the Fed has set its sights on bailing out Europe, too. Through currency swaps, it has committed to offering potentially hundreds of billions of US dollars to the European Central Bank and we cannot rule out the possibility of direct intervention.

 

The Fed’s response to the crisis suggests that it believes the current crisis is a problem of liquidity. In fact it is a problem of poorly allocated investments caused by improper pricing of money and credit, pricing which is distorted by the Fed’s inflationary actions.

 

The Fed has made banks and corporations dependent on cheap money. Instead of looking for opportunities to invest in real products that will serve the needs of consumers, Wall Street awaits the minutes of each Federal Open Market Committee meeting with bated breath, hoping that QE3 and QE4 are just around the corner. It is no wonder that long-term investment and business planning are stagnant.

 

We live in a world that seems to have abandoned the concept of savings and investment as the source of real wealth and economic growth. Financial markets clamour for more cheap money creation on the part of central banks. Hopes of further quantitative easing from the Fed, the Bank of England, or the Bank of Japan – or further longer-term refinancing operations from the ECB – buoy markets, while decisions not to intervene can cause stocks to plummet. Policy makers focus on spurring consumption, while ignoring production. The so-called capitalists have forgotten that capital cannot be created by government fiat.

 

Control of the world’s economy has been placed in the hands of a banking cartel, which holds great danger for all of us. True prosperity requires sound money, increased productivity, and increased savings and investment. The world is awash in US dollars, and a currency crisis involving the world’s reserve currency would be an unprecedented catastrophe. No amount of monetary expansion can solve our current financial problems, but it can make those problems much worse.

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AnAnonymous's picture

That would be a point to develop: why should in your fantasy your fantasy characters destroy books painting them as heroes?

Any fantasically rational cause for that?

Well, lately, US citizens through their congress destroyed the evidences they tortured people in Iraq and elsewhere, but that was to avoid self indiction.

TheFourthStooge-ing's picture

More denial, more impossibility of self indiction, more offuscation.

Here is textbook example of Chinese citizenism mettle.

Observe how the nature of this Chinese citizenism mettle is eternal.

But hey, it is self justifying...

 

akak's picture

When you can self-indict over the topic of unjustified Tibetan invasion, conquering and blobbing-up, and 65 years of Communist warmongering threats against independent Republic of Taiwan, then rational discussion can commence flowing.

Until then, Chinese Citizenism denialism will rule the day.

Much like Chinese Citizenism human crappings rule the roadsides of China.

fuu's picture

All three of you are boring.

Just saying.

akak's picture

More denialism, from a citizenism citizen of unknown origins.

Regardless of it, shedding from me like water off duck's back.

And still, Chinese Citizenism marches on.

Make me laugh!

Poor Grogman's picture

 

 

Did i miss anything?

jus_lite_reading's picture

I'm a little late to this discussion but Jim Rogers is endorsing Ron Paul... 

http://www.youtube.com/watch?feature=player_embedded&v=odpttximeTw

He said: "Ron Paul Is The Only Politician In America That Seems To Have A Clue About What's Going On In The World" - Jim Rogers

Truer words were never spoken...


jmcaule4's picture

Like Zero Hedge? King World News?

Want to know when to expect the next round of QE?

Is it a good time to be long stocks? What about gold miners?

http://jmcaule-whatimlookingatrightnow.blogspot.ca/

Unprepared's picture

I hope you are referring Krugman's head ... err, never mind.

Jason T's picture

He's got my vote.  

brewing's picture

and a lot other's.  HuffPo headline today...


"Ron Paul Racks Up Delegates, Putting GOP Establishment On Edge"

Cursive's picture

Ron Paul's virtual obscurity is proof of H. L. Menken's observation that we get the government we deserve.

Sanksion's picture

George Carlin observed that also. Here.

Treason Season's picture

Notwithstanding all the political assassinations, massive propoganda and an infinite amount of fiat money to corrupt. Have a little sympathy. Americans are victims too

Manthong's picture

I think they are more morally and ethically bankrupt than anything..

you need a fair amount of intellect to manage a global Ponzi.

Unprepared's picture

Self-delusion doesn't count as intellect.

NotApplicable's picture

Those people aren't the real management. They are merely the shiny facade that gives it an air of legitmacy.

aheady's picture

Agreed. There's no lack of intellect anywhere in that equation. And Ron Paul is advancing that "they don't know what they're doing - they're out of their minds" script. WRONG. It's all by design and that only makes me think he's part of it.

margaris's picture

Peter Schiff did the same a few weeks ago. He was in the news saying that Bernanke has no clue and is delusional.

http://www.youtube.com/watch?v=zDDbgBK6V0M

I think its just rhetorics.

Ron Paul and Peter Schiff are real gentlemen.

I dont doubt their integrity,  because of their good manners. But I admit I would like to see them go berserk on the banksters.

And they will. Just wait for the economy to get REALLY BAD!

aheady's picture

Like I said, it makes me wonder... I'm truly on the fence about Mr. Paul. Certainly not questioning his gentlemanliness or manners, which are impeccable. I just don't trust a career politician in any form at this point. And you are absolutely correct about rhetoric being the likely culprit. Point taken.

insanelysane's picture

He is 100% correct.  The financial sector used to be a mechanism that funded the economy but now it is the economy. 

The government during the Bush years drove it into the ditch.  The government under Obama, got it out of the ditch and headed straight for the cliff, Thelma and Louise style.

resurger's picture

WOOT! RON Ownage

AnAnonymous's picture

US citizens are intellectually bankrupt, maybe.

In case, it would give that central bankers are just Us citizens who happen to be central bankers.

But that would mean that Paul, who is a US citizen, is also intellectually bankrupt. A conclusion Paul is not ready to face so...

tmosley's picture

You are quite possibly the most collectivist person to have ever lived.

It doesn't matter what people do or say, only the color of the passport matters to you.  That color defines all existant and potential characteristics, regardless of reality.

AnAnonymous's picture

More collectivist person than your common US citizen?

That is quite an achievement.

Just as a reminder: US citizens are those persons who tie their concept of rights to the entire set of humanity. Beating that would be quite an achievement indeed. Quite hard to think how.

But hey, where is my medal? US citizens deliver medals to people like Obama for peace endeavours.

So it means that I am eligible for a medal of the most collectivistic person ever, no matter how tiny I am compared to your typical US citizen.

UP Forester's picture

Wow.  Conflate much? 

Here's one for you:  all Chinese citizenismship worshippers have slanty eyes, and can be blindfolded by dental floss.

Where's my medal?

AnAnonymous's picture

In your mind, just like the fantasy of Chinese citizenism...

Feel free to award yourself more than one.

Contrary to reality, in fantasy, there is no limit other than your own imagination.

TheFourthStooge-ing's picture

AnAnonymous said:

Feel free to award yourself more than one.

Great, lets consume resources to eliminate non consumers. Their elimination will free up resources.

The culture of death pertaining to Chinese citizenism is baffling.

It is true that every day passing by shows how much better Chinese citizenism citizens know.

Chinese citizenism citizens know best, well known, and it takes more than Chinese citizenism citizen dimension denial of reality to deny that.

Yeah, sure.

 

akak's picture

In your mind, the bigoted and collectivist, self-induced fantasy of US Citizenism swirls like the heaven-sent vapors of the poppy's offspring in the Double Lucky People's Liberation Opium Den and Internet Cafe where you troll online.

Smoke and vapors, that is all that your mythical "US Citizenism" is constructed with.  That, and blind bigotry and hate.

But nobody ever expects much from hive-mind collective automatons in defense of their totalitarian regime and historical crimes.

Plow the ground of shame, and Chinese Citizenism will never take root.

AnAnonymous's picture

'Americanism' is fantasy? 'Americanism' does not exist? 'Americanism' is a figment of my imagination?

As you wish.

tmosley's picture

I wasn't aware that Oslo was an American city, or that the Nobel committee was stacked with American citizens.

And yes, natural rights exist, and do apply to all humanity.  To deny this is to sew the seeds of violence, as American policymakers have done for the last hundred plus years in abundence, as have your own nation's policymakers.  Recognition of natural rights is no more collectivist than recognizing that all human beings possess nerves, muscles, and bones.

AnAnonymous's picture

One hundred years? Well, animals can be slaves. Or something. And they have no property rights. Else, you know, you end with the fact that US citizens infringe on their so called natural rights from the very beginning and not through the state only, by through private initiative.

As a side note, US citizenism is 'Americanism' and US citizens 'americans' as proponents of US citizenism 'americanism'

akak's picture

As a side note, the bigoted and mindless ramblings of autistic Chinese Citizenism dishwasher trolls is "bullshit" and Chinese Citizenism citizens are "collectivist hivemind automatons" as proponents of Chinese Citizenism blobbing-up, denialism and extreme hypocrisy.

TheFourthStooge-ing's picture

AnAnonymous said:

Well, animals can be slaves. Or something. And they have no property rights.

Ah, ah, just like Tibetans under Chinese citizenism.

Wok calling rickshaw blackened.

 

AnAnonymous's picture

Tibetans are slaves?

Wooo, incredible what US citizens are ready to invent.

Harsh on humanity when you get your humanity tied to US citizen distorted perception of reality.

Consider, Tibetans are slaves right now while the negroes were not slaves in the start of the US, all that to justify that China infringes the so called human rights in a similar way US citizens did.

Tells how much US citizens are serious about humanity welfare.

akak's picture

More denialism of hypocritical subhuman Chinese Citizenism hypocrisy: Make me laugh!

Chinese totalitarian Communist regime invades, conquers, and blobs-up free and independent Tibet (where slaves did NOT exist, lying Chinese roadside turd!), and this Chinese Citizenism acolyte pretends it never happened!  Oh the glorious People's Defecation Army hypocrisy! 

Lies, lies, and more shitty lies: the flower of Chinese Citizenism blossoms, revealing stinking crap inside, where even blowflies dare not enter.

AnAnonymous's picture

Slavery did not exist in Tibet prior the invasion by the Chineses?

Oh really?

So the reports by western people were the result of Chinese citizenism?

More kicking the can, more inability to deal with reality.

akak's picture

 

Slavery did not exist in Tibet prior the invasion by the Chineses?

Oh really?

Really.

Fantasies of Tibetan slavery used by Mousy Tongue and People's Defecation Army to justify invasion and conquering of Tibet ---- just as every government uses lies to justify invasion, war and blobbing-up. 

Like "weapons of mass destruction" in Iraq?  That was Bush practicing Chinese Citizenism.  No shame adheres in doing so.

History knows of no Tibetan slavery, other than lies of totalitarian Chinese Citizenism.

Chinese Citizenism only better at the lying, doing so for thousands of authoritarian, rabbit-breeding years.

And then, of course, the obligatory denialism, which Chinese Citizenism citizens excel at doing best.

TheFourthStooge-ing's picture

AnAnonymous said:

Tibetans are slaves?

Wooo, incredible what US citizens are ready to invent.

Ah, yes, because Chairman Mow instructed forced labor in Tibet, Mongolia, and Nepal to be named Patriotic Volunteerism.

Volunteer to be patriotic or Peoples Liberation Army will liberate you from your life.

Very Chinese citizenish...

 

moondog's picture

Ancient Chinese Secret:

01100011 01101000 01101001 01101110 01100101 01110011 01100101 00100000 01101000 01100001 01110110 01100101 00100000 01101100 01101001 01110100 01110100 01101100 01100101 00100000 01110000 01100101 01101110 01101001 01110011

Uchtdorf's picture

I just converted that binary to plain text here: http://www.convertbinary.com/

 

 

Uchtdorf's picture

Perhaps if we stop feeding the bears they will stay away from the campground.

Temporalist's picture

They are called trolls and they never leave.

Matt's picture

lots of trolls have come and gone from Zerohedge.