The Federal Reserve Board meets today to decide their next brilliant move to save the US economy. Oh wait, they tried a minuscule quarter of one percent interest rate increase in December and the markets have been reeling ever since. What tools do they have left in their toolbox?
Be sure to visit http://www.ronpaullibertyreport.com for more libertarian commentary.
The Federal Reserve Board meets today to decide their next brilliant move to save the US economy. Oh wait, they tried a minuscule quarter of one percent interest rate increase in December and the markets have been reeling ever since. What tools do they have left in their toolbox?
Be sure to visit http://www.ronpaullibertyreport.com for more libertarian commentary.
The Federal Reserve Board meets today to decide their next brilliant move to save the US economy. Oh wait, they tried a minuscule quarter of one percent interest rate increase in December and the markets have been reeling ever since. What tools do they have left in their toolbox?
Be sure to visit http://www.ronpaullibertyreport.com for more libertarian commentary.
Later today, there'll be a major release of an exciting event because the Fed's going to finish their meeting and tell us what they're going to do to save the economy.
And there's a lot of fanfare going on.
What do you think is going to happen?
Are you saying, well, maybe they're going to solve the problem?
Everything is going to be okay?
The word everyone's using is dove.
They're going to be doveish.
Dove-ish, yeah, that's what they're saying.
You know, the odds of that happening, of course, is slim to none because of even the title of our program, the Fed is in a box.
A lot of times people refer to where the Fed is there between the rock and the hard place, that they have no place else to go.
And some argue that, well, they've been around for a long time and they seem to get out of trouble.
You know, the free markets are always giving us these recessions and causing problems.
And the Fed always comes to the rescue.
That's sort of the belief that goes on.
And they still are bragging how they rescued the economy in 08 and 09 from a total disaster.
And yet I saw just recently that total debt now in the economy is 40% higher than it was in 2008.
And the unemployment statistics haven't improved.
It's really still a major mess.
But the Fed rarely gets blamed, but more so than ever before.
And that's what I think is good because we want to get the people educated.
But I want to talk about the Fed, the philosophy of the Fed and the philosophy of money.
But the biggest contention I have, even though economically it's terrible, constitutionally it's terrible, but one result from this is the growth of government.
You know, the people would never be willing to give up so much of their savings for the government to spend all this money.
And here this gimmick is, well, we're going to do, we're going to create new money out of thin air and we're going to get away with it forever.
And of course, we have the welfare and domestic spending.
Everybody gets something for free.
It's their stuff.
They never ask where does it come from.
It comes from the government and the Fed is part of the government.
They never say that it ultimately is a cost to the middle class.
But it's also, when you think in the case of foreign policy, it seems like they are participating in this fraud as well.
Well, you know, as you've pointed out many times, the empire, as we call it, would be impossible without the Fed.
You know, just look at one thing.
I've got a couple of other things if we have time later, but just look at one thing.
In 2013, President Obama announced a trillion-dollar 30-year program to modernize our nuclear triad, all of our nuclear weapons.
A trillion dollars over 30 years.
If you divide that by the number of Americans, that's about $3,000 for every man, woman, and child in America.
But if you look at the statistics, I forget what the exact percentage is, but there's a very large, significant percentage of American homes that if they were hit with the surprise $500 bill for something, they simply wouldn't have the money in their savings.
They don't have the money.
So how is every man, woman, and child going to come up with $3,000 from newer nuclear missiles?
You mentioned the triad.
You know, I think there was one of the candidates that sort of messed up and didn't understand what the triad was.
But the triad is really pretty much of an old story.
It's a force because they're talking about manned bombers.
You know, in this age of missiles and submarines, everything else, and they're talking the triad, we have to have these airplanes, we have to keep this going.
You talk about malinvestment.
I mean, this is really bad.
And yet, there are still a lot of conservatives.
You've heard the arguments.
Well, the military spending is good for jobs.
And then what do they do then?
Where do these jobs go?
Does it go to one state, or could it be that it's a political decision?
Well, there are a lot of very good jobs around Washington, the Beltway, that come from the military-industrial complex.
But the poor guy in the middle of the country who's having to suffer through inflation to pay for it is not feeling that good.
Yeah, and people say, well, it's still good.
They're getting money, and there's jobs.
And, you know, Paul Kruegerman would argue anything is helpful if they're getting paid for something.
And the silly story is, if you pay somebody to dig a hole and pay somebody to fill it up, it's still a job and it's good for the economy.
But nobody looks at the bastiat instead of what, and Hazlitt was so good on this.
If we spend this trillion dollars and you think seriously through this, you realize that we don't need it.
We're not stronger.
And it's a cliche today.
If you want to be strong for defense and you're going to take care of ISIS, you have to rebuild the military.
But they never consider that that expenditure is malinvestment.
Yes, there'll be a submarine built or there'll be airplanes built or more.
They want to redo the nuclear system.
You know, how many nukes do we need?
So they want to do this.
But they never ask the question: where would that have gone?
You know, what would have happened if it would stay in the economy in the free market here?
Maybe there would be competition in health care or competition education.
Maybe there would be much better education for more people at a much lower price.
But the seductiveness comes from the Fed because it isn't like, well, we're not going to appropriate a trillion dollars and that trillion dollars are going to come back immediately and the people get to spend it.
Because what they do is they pump it into debt.
And this is the culprit that the Fed allows to happen: they prop up the debt system and they figure they can do it forever.
When you issue the reserve currency like we do, you get away with it for a long time.
So the more fragile the system becomes, the more the reserve currency benefits.
But I think there are cracks in that.
And I think that's coming to an end.
Yeah, and look at the, there are certainly a lot of people that look at how countries that are considering stopping using the dollar as a reserve currency end up on the enemies list of the U.S. Like you mentioned, people wouldn't want to pay their fair share to pay for this military stuff and they get away with this.
But what about the welfare mentality?
You know, it's all based on a humanitarian instinct.
You want to help people who aren't able to take care of themselves.
But just think of how many people now don't have good health care and that the cost is going up.
Just think of all the gimmicky going on that if you have insurance and do what exactly the government says and pay the insurance companies, you know, the medication might be $3.
But if you say, I'm going to go it on my own, I'm going to pay my own way, that $3 medication might cost you $250, or sometimes it's into the thousands of dollars if it's important drugs.
It sets up monopolies.
I think this whole system, whether it was the drug bill that Bush passed as well as Obamacare, was designed to help corporations, just as the military industrial complex is.
It helps the corporations, helps the banks.
All this domestic intervention is to help corporations.
The medical system is corporations now.
Then you have the insurance companies and the drug companies, and still people have a tough time getting health care.
And the people who are punished the most are the most responsible who want to pay their own way.
It reminds me of this system that the Fed created.
If an individual, and I remember when these days were where people felt responsible for taking care of themselves in old age, and they weren't really sophisticated and buying stocks and bonds, but they would save money and they would get paid 2%, 3%, and they were frugal and they lived within their own means.
But today, you know, they punish those people.
They now are talking about taxing people who put their money in savings and they want the elderly just to spend the money.
But that's all comes out of this mentality that a central bank is able to plan the economy.
And I think that's where the biggest fallacy is: they believe in taxation through dilution of the value of the money.
They believe in inflation, of course, just print the money as you need it.
They believe that we have to expand debt, and that's one reason why they like the idea of fractional reserve banking because this allows the banks to expand the money supply, not just the Federal Reserve.
Challenging Monetary Mindset00:09:03
And I think people instinctively understand that something is very seriously wrong with the economy.
Unfortunately, not enough of them have listened to you over the years and understood really what the cause is.
But I do think people have a sense that something is really wrong.
And that's why you see the attraction, I think, of someone like Donald Trump or Bernie Sanders, who are each promising something that appeals to people who haven't spent the time like a doctor would looking at what's causing the disease rather than the symptoms.
And, you know, and I've always maintained that the problem is apparent.
The solution, really, if they hear it, it's not all that complicated.
Because if you go to the average 10-year-old and talk to him and talk to them about monopoly money or paper money, that, you know, if you just go out and write things on a piece of paper, do you think you can go to a store and buy the money?
I tried that once when I was a kid.
Didn't get so much.
You were learning your lessons about how the Fed worked.
But you know, the solution there is to define the value of money.
You know, that you can't be arbitrary.
And, you know, defining the value of money like our original government did, only gold and silver.
And they actually, the first Monetary Act was in 1792.
They defined the dollar as a weight of silver.
And that was precise.
It shouldn't be confused with fixing the value of the money on the purchasing power because you want things to fluctuate.
You want prices to go up and down and the value of the money to go up and down.
But what you don't want is no definition.
And right now there is no definition.
The dollar is defined as a Federal Reserve note, as something they owe.
So if you have a dollar and you take it to the government and say, well, this is a note, what are you going to pay me?
It used to be that give us gold.
And in my lifetime, we could go and we'd get silver dollars.
When I first started collecting coins as a kid, you know, I would pick out the silver dollars and go to the bank and buy silver, even remembering not too long ago that even copper, you know, became, now copper is more valuable than a penny, and I would save copper pennies.
Not that copper is a real hedge against it, but things were of real value, but the definition was so important.
But it was absent of fixing prices.
You didn't fix the price of money.
This is probably the number one economic error of the central bank is they think they know how to manage the entire economy by fixing interest rates, which is something that they have no idea what the proper fixing of the interest rates should be.
But why is this so important?
We've lived through wage and price controls and fixing prices on different things, you know, education and medical care is sort of being fixed by government.
But when you fix the price or value of money through interest rates, what you're doing is you're regulating the entire economy.
One half of the economy is always the value of the currency.
Most people can understand supply and demand of cell phones and different things.
You know, the more they build and the technology, you know, they go up and down as long as there's a market competition.
But rarely do people think there's a supply and demand of money.
And that is also a factor.
But they have this control.
It's done once again in secrecy.
You know, and there are some people who really benefit from this.
And it's usually the people who wheel and deal and provide products like in the mortgage market that led up to the crisis of 08.
And then the very people benefiting from this evil, wicked system are the ones who are in control and they get the bailouts.
So the innocent people that I was talking about, the ones who are trying to save, they end up getting punishment because they end up with a higher cost of living.
And the worst thing in the world to do would be to tax them for putting money in the bank.
And other countries are doing that.
And then the other thing that we're on the verge of doing to people wanting, the central bankers want to counteract, is they're still saying you're not spending enough money, so we're going to penalize you, but we don't want you to have a run on the bank.
We don't want you to say, hey, I'm getting worried about this.
You know, banks are closing.
I'm going to go.
And somebody says, well, you know, the last of my savings, I want it in a shoebox.
You know, I want Federal Reserve notes.
And that's why they're going toward this cashless society because that would be the last vote of the consumer to go and protect themselves.
And even though it's lousy protection to buy Federal Reserve notes, which are shrinking in value, but in the old days, and why Roosevelt, what was the first thing he did, was he confiscated gold because gold was a hedge against government overreach and spending and all the things that were going on.
But right now, there's not going to be many things that the people can rely on, but they need to really understand this system that the foreign policy and expenditure there depend on it.
The welfare system depends on it.
These artificial interest rates causes the malinvestment.
It causes the debt.
And then once again, not only does it cause all these problems, but they always try to cover up.
They will talk about saying debt doesn't matter.
And then they'll have the regulations.
Right now, the biggest regulator is the Federal Reserve.
They make all these mistakes.
Instead of eliminating mistakes, they say, we will regulate and just pile on.
That's what Dodd-Frank was all about.
Then they'll come along and they'll say, well, yeah, we understand this is risky business.
Fractional reserve banking where banks create money out of thin air.
We'll have insurance.
We'll have government insurance.
We'll say that all your deposits are protected and the big guys get protected too.
Because you're too big to fail, the government will bail you out.
So they have the insurance and they get the bailout, so they cover it up.
But what we're witnessing today is the end stage of this.
And that's why the Fed is in a box.
They're truly between the rock and the hard place.
They don't have a solution because, regardless of what they say today, they may be able to move markets right before the announcement.
They may be able to remove markets afterwards.
But long term, they're on a dead-end course.
And this can't work and it's going to end.
It's going to end badly.
But the good news is that the information and understanding of monetary policy in the Austrian School of Economics is better understood than ever before.
And it involves sound money.
It involves truly voluntary contracts.
It includes property rights.
And you put that together, and it's a wonderful answer.
And it causes a great deal, a much greater chance of having prosperity as well as peace in the world.
So I cannot see why people would even be tempted to reject these principles.
And today, as we look and wait and see what the Fed's going to say, and finally end up finding they're not saying anything, we just have to further protect ourselves.
But ultimate, the only thing, we can talk about economic policy and sound money and the Constitution, but ultimately, the only saving grace will be to be able to live in a free society where the government is designed to protect our liberties and not have one where they are representing the various special interest groups who band together and destroy the middle class.
And that is what's happening.
We have this majoritarian approach that as long as we get 51% to agree we can do anything we want to the people who produce in the world.
And that is why, you know, you hear some of the other days saying, tax, we need to tax more and more.
We need to wake up and say, we're finished with that.
We're sick and tired of being taxed.
We're sick and tired of the inflation.
And what we need to do is just have a whole generation of people willing to challenge the monetary system and the economic system that we have today.
That is the only thing that will answer to the problems that we have.
And we have a good background, we have an understanding, but it's better understood today than it ever has in the history of the world because freedom advances slowly, ups and downs, back and forth.
But today there's a much better understanding of monetary policy and economics than it even was when the founders put the Constitution together.
So we are advancing in that sort, but believe me, Washington has a lot of catching up to do.
I don't see them catching up until the whole thing comes down and we have enough people to rebuild it with these sound economic theories and defending the principles of liberty.