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Aug. 6, 2021 - Ron Paul Liberty Report
23:58
Central Planners Don't Have A Clue, So Don't Trust The Fed

Central planning always fails, without exception. Civilization is never created from a blueprint developed in the imaginations of a few elitists. In fact, it's the exact opposite. Civilization is always destroyed by central planners. So why do people constantly find themselves suffering under the yolk of utopians, when the only possible endgame is failure?

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Time Text
Economic Planning's Downfall 00:04:46
Hello everybody and thank you for tuning in to the Liberty Report.
With us today is Chris Rossini, our co-host.
Chris, nice to have you with us.
It's great to be with you again, Dr. Paul.
Very good.
I want to talk about economic planning, which has been one of our nemesis of probably since FDR.
Even before that, there was economic planning.
If you're in government, you feel obligated.
I have to plan things.
I have to be important.
They never say, I'm in office now.
I want to make the country freer.
No, they have to set a record for themselves, so they have to plan.
But it's been notorious since the Depression.
Each administration, there's more and more planning, more and more spending, more and more debt.
Planning isn't working out so well.
So today, Chris, we'll touch on the subject of when is too much planning too much?
And when is it coming?
And people so often ask me, yeah, I agree with you.
This thing is going to end, but tell me exactly when that's going to end.
We'll talk a little bit about that.
But the whole thing is, is the economic planning has just really, really exploded and deteriorated in this last year and a half, ever since COVID.
But some people think, you know, COVID, there was a pandemic and they had to react and that was a natural normal consequences.
Others, like myself, I think there was a little bit of conniving involved.
Not that they invented for the purpose of doing this, but there was an opportunity.
Don't let this opportunity go to waste.
So when there was something to blame for some problems, an excuse to move things along, you know, we're not supposed to ever waste an emergency.
And if you don't have an emergency, make an emergency.
And there was a little bit of activity going on in Washington with the politicians to stir up a lot of fear and interest.
So the planners really, really got busy.
And the markets got a little bit nervous.
So what do the politicians do?
Well, they're nervous it's going down and what's going to happen?
So the Fed was readily available.
Not that there was reason to be cautious because the Fed was already in some problems even before the pandemic and they had been spending too much and there was a downturn and they were dealing with the federal, they were dealing with the stock market.
So it was there.
And once this went down though, the Fed came flying in and they didn't just produce a couple billion dollars.
They got into the trillions of dollars for the first time.
They talk about trillion dollars like it's nothing and they've continued to do it.
But it's caused a lot of distortions.
The distortions were there.
The economic planning, the philosophy that Republicans and Democrats follow, that's been there.
The protection of true liberty has not been there.
So it was pretty messy.
But it was especially weak at the beginning of this pandemic.
But it would be my assumption, Chris, that things have gotten a lot worse.
I mean, if you happen to believe that government was too big and should be smaller, we should be spending less and we shouldn't be monetizing all this debt, we're not winning that argument.
So in this last year and a half, we've had all kinds of examples of economic planning, which we shouldn't call it economic planning.
It's not planning, unless a disaster is worthwhile.
Whatever they're doing, they're ending up with more of a disaster.
So the pretense at planning and making things better, that doesn't exist.
They make an effort at plan for political reasons, and they make things a lot worse, and we will be forced to deal with it.
Yes, Dr. Paul, you know, central planning has always failed.
It fails today, and it will always fail in the future.
So why does this keep happening?
Well, each generation has to learn anew.
You don't come into this world understanding why central planning always fails.
And the central planners will never tell you why they're always going to fail.
It's because they believe that they can make dictates, and everything will go on as usual, except for the dictate.
Everything will just adapt around their dictate.
And it's just not true.
When they make their dictates, everything changes.
And it's impossible to know all the subsequent changes that are going to happen.
It's impossible to know how every individual in their mind will react in their own unique localized situation.
So when government intervenes, I may react one way, Dr. Paul may react another, my neighbor another way.
Economic Planning's Chaotic Consequences 00:06:18
And it all happens on the spot.
I mean, we don't even know ourselves how we're going to react.
We can plan.
We could say, okay, if the government does this, I'm going to do this.
But when it actually happens, in that moment, we may decide to do something totally different.
So it's impossible to centrally plan the country, the world, the universe, whatever they dream up in their minds.
But they still do it.
And what they do, as Dr. Paul mentioned, is they just multiply problems, pile them on, one after another, after another, up until the point where the people have had enough and they want their freedom again.
You know, economic planning is supposed to, you know, eliminate the chaos.
Yet what we're saying is economic planning is the cause of the chaos because things don't work out as the politicians think.
You know, in a free market, there's a job for the businessman and even the worker to anticipate what the future is going to bring because they have to make decisions, especially the entrepreneur who has to borrow money and make plans and anticipate what the desires are going to be of the consumers.
And if they anticipate right and run a good business, they make money.
And they can participate in the capitalist system by earning more money than they need just for maintenance of their livelihood.
They have to make enough that there's extra, which becomes the capital for expanding their business or loaning the money to somebody else to expand the business.
And they have to know something in the free market.
They have to say, well, one of the major costs and good information that we get on what we should do are the interest rates.
You know, if there's not much capital out there, interest rates will change and they will go up and the savings are low.
And this will cause the savers to do different things.
But the person who's getting ready to invest and anticipate the marketplace, they have to make a decision.
Today, that doesn't exist because we don't have a market psychology.
The main thing that the individuals, everybody now has to anticipate is a whole pins and needles, especially on the week when the Fed is meeting.
What did the Federal Reserve Board share some men say?
What were the words he used?
Oh, let's look at the report this week, and six weeks ago he said this.
He changed two words.
And then they wait and they have a press conference offer.
They believe these words and the words do have an effect because that's what everybody looks at.
And yet it's all false illusions.
It's all fake.
It isn't trying to make a decision about something happening in the market.
It's trying to figure out what the bureaucrats are going to do and what the politicians are going to do, what the Federal Reserve is going to do.
And guess what?
You've already said it, Chris.
Things get worse.
They don't get better.
And just look at what's happened in this past year.
Well, we can't let the system fall apart, which it was on the verge of doing.
We have to get the helicopters going, pack helicopters, and pass the money out.
And believe me, it was like helicopters.
I mean, the money just dropped down on every family.
But most of that money is getting spent now, and things are changing, but there's no true growth, no true investments that go on.
So the management doesn't work because even the managers of an economy have no idea what the results are going to be.
If you pass out a lot of money, you don't know what the consumer is going to do with the money.
He might pay debt, he might buy a car, he might buy a house.
Who knows what he's going to do?
So you cannot anticipate what's happening.
So the Keynesians, who have all these formulas and they're very, very complex, they figure it out and they're trying to say, well, you know, with arithmetic and calculations, we can tell what the economy is going to do in six months.
They don't know whether or not the whole system is going to fall apart within the next six weeks, which it could.
But that's the one big difference between free market economics and government planning.
Is the free market planners, you know, the free market people have an understanding that there's a subjective element.
What the people think and what they want to do makes a big difference on how they spend their money.
And right now, they're getting some weird signals.
For instance, I think one of the weirdest things under today's conditions, Chris, has been this thing that the government passed out a lot of money to the point where unemployment and welfare checks and the special bonuses from the government was so great, they created an incentive for people not to work.
Wow, that's a pretty neat deal.
And now there's a high demand for labor.
And they tend to enjoy that, but that can't last.
That's artificial.
And it also means that where's the money going to go if it's not going into productive investment?
It's going to go into higher prices.
And Chris, that's the one thing that's going to happen.
And you can be certain of, even though we don't know how much and when and what the conclusion will be.
But if you pour out the money and monetize debt to the tune that they're doing now, it's going to lead to the ordinary inflation, which is the prices of goods and services that people need to take care of their lives on a daily basis.
Right, Dr. Coleman, what a great point you made about the Fed and how everybody hangs on words and people do that with politicians too.
And our job is to help break this spell.
And the way you do it is you realize that civilization, human civilization, is not made with a master blueprint by some individuals.
But there are always people who believe that they have the blueprint.
They are going to create the society of their imaginations.
Breaking the Spell of Blueprint Society 00:12:34
And, you know, you know what they're going to do.
We see it today.
They want to destroy what is.
They want to destroy the present, destroy all memories of the past.
We're going to start human life with a blank slate.
And then they're going to rebuild this society that they have in their imaginations.
And, you know, what we are seeing today is not something new.
Look at the French Revolution, the Russian Revolution, Maoism in China.
It's the same thing.
They're going to build their utopia on top of all the rubble that they create.
And all that they do in the end is destroy, because anybody could destroy.
Anybody could do that.
They destroy everything and it stays destroyed.
They build absolutely nothing because society is not built that way.
It's not built by a few individuals, no matter how much money they have, how much knowledge they have, or how much power they have.
So today, when we see the words build back better, you know for a fact they're not going to build anything back better if they destroy everything.
Everything will stay destroyed until the people once again want their freedom again.
You know, this problem that we're facing today is very, very serious.
And it's talked about because the Fed, I think they realize that this is different than ever before and that they just can't do that.
And the balance sheet is getting so big.
And people, you know, still have a little bit of an opinion that that can't last.
So in 2019, the Fed actually started to shrink the balance sheet.
And they did that for a few months and it caused a calamity.
And this was before the coronavirus came out.
So they were shrinking it and the economy was collapsing and all this.
So that's when they really moved into the QE stuff.
But that's been going on up until just recently, especially with the COVID in the last year or so.
They have been increasing the amount that they have to monetize.
And on a monthly basis, they take $80 billion, create new $80 billion to buy Treasury bills, and then another $40 billion to buy mortgage-backed securities, part of that housing bubble that's back in action again.
So they do that.
It's $120 billion a month that they are just pumping in there.
And a lot of that ends up into the hands of the very wealthy and the banks.
They have excesses reserves and they can earn a little bit of interest a lot more than if an individual saves some money and gets a CD.
But the announcement this week was absolutely bizarre because they can't turn it off.
And now they've taken that $120 and they've increased it, adding another $300 billion in cash by the end of this year.
So they know it's not working, but they know they can't cut back.
That's one thing.
I don't think anybody believes that that balance sheet and this acceleration of monetary inflation is going to be reversed.
It is an addiction.
It's like an addiction.
There's too many side effects and too many symptoms of an economy where you try to cut it off.
The bankruptcies would just go crazy.
And even though the market, if you said, well, the government's gone, the Fed's gone, Congress is gone, what's the market going to do?
There'd be a lot of bankruptcies.
It'd be pain and suffering.
But if freedom was restored, it would last about a year.
And everybody get back on their feet because all the debt would be liquidated.
But nobody considers that at all, except theoretically.
But they did that in 1921, and it worked out quite well.
After a year, they went back to economic growth again.
But right now, it's not going to happen.
So they're going to continue.
They're accelerating already.
And people anticipate it.
So they have to figure out what's this Fed going to do?
Are they even hinting?
And every once in a while, I think most people, especially Fed, know they can't cut back.
But afterwards, they'll say something.
Fed said, well, things are looking better in the front here.
And then a few more months, we might be able to start cutting back.
And then for 20 minutes, the stock market sinks.
And then they say, oh, we don't believe them.
So it goes back to believing that the printing presses will run.
But one thing that will happen that they have no control of is the purchasing power of the Federal Reserve note after this gets out of control because that's based on a subjective belief that the value there will last forever because we are the current, you know, the reserve currency of the world, although it's getting smaller.
Then they can trust because we are still a wealthy country.
We still have a military might.
So they believe that this is going to last forever.
But statistically and economically, it won't work.
It's not going to happen.
And that's the reason why one of these panics are going to occur instead of the Fed just pumping out tens, if not hundreds of billions.
And of course, the expenditures now are into the trillions of dollars in last year.
With coronavirus, $6 trillion they've spent.
And you can't really see healthy economic growth.
So until people realize the great danger and what has to happen, we're going to have more of it.
And then there will be a reckoning.
And that is when the thing falls apart.
And people will, it'll be a survival mode.
But Chris, the thing that bothers me is people will survive if they have their liberties.
But if they don't have it and the tyrants gain greater foothold and they are in this past year with this coronavirus, and they're working so hard to get this passport, vaccine passport.
Everybody has to have a vaccine passport.
And the Fed is able to badger the big companies.
If you don't do it, we're going to punish you.
And it's a very powerful tool they have because they depend on the Fed to keep doing it.
But eventually, when the purchasing power of the dollar, which is already going down significantly, when it gets out of control, the ballgame's over.
And we better know what we're going to do.
And I hope we can contribute to what it is like to have a monetary system which is considered a sound monetary system.
The founders knew exactly what the runaway inflation was with the continental dollar because it was not worth a continental.
And they said nothing but gold and silver can be legal tender.
They put it into the Constitution and they knew what was wrong.
But that whole principle was eroded.
And by the time the Fed was started in 1913, it's been downhill.
And it's on a dead-end road of destroying that currency.
But I don't know.
I don't think anybody knows.
We know that if it continues, something like that is going to happen.
But it could be six months or six years.
They can be held together.
But one thing for sure, until you solve that problem, the standard of living for all Americans will go down, except those few who know how to protect themselves by being participants in the whole charade.
Excellent job, Dr. Paul.
I'm going to finish up by saying our job is twofold.
One is to point out what does not work and cannot work, like central planning, like the Federal Reserve, like all the government agencies that try to plan every single industry, every single aspect of life.
That is a road to failure.
But we also, number two, want to point out what does work.
And what does work is individual liberty.
What does work is that we individually have control over our own lives and our own situations largely.
You know, that's where the real power is.
It's in you.
It's in me.
It's in each individual where we are in our lives, wherever we happen to be.
And I say we're largely in control because we can't have complete control, just like the central planners.
No one is all-knowing.
I can't predict the weather because I don't know all the possible infinite changes that could take place, nor do I know what my neighbor is thinking and acting and believing.
These are all impossible to know.
So we always have to factor in that we live in a world of uncertainty.
And we can't escape that.
There are things that we cannot know and will not know no matter what.
But even despite that, we can set our own course and move one step at a time towards it.
You know, and the libertarian way is, as you're doing that, don't harm anybody and don't take their stuff.
But we have to also make sure that we're not kidding ourselves.
What we're striving for has to be real.
It has to be true.
You know, you look at the politicians and all their followers and they're chasing fantasies that no matter how many steps they take, they're never going to reach it.
So while central planning is the road to ruin, the upside is individual liberty and individual responsibility is the road to peace and prosperity.
Very good, Chris.
That's excellent.
You know, we mentioned that people, you know, one reason why they poured the money into the system on Corona was that the economy would turn down and there will be a weakening of the economy and they had to stimulate the economy so they pumped the money in into the system.
And all of a sudden we had this unusual thing where people were getting more money sent to them from the government so they didn't have to go to work.
So there's a lot of jobs but nobody will go to work.
So that is a decision made by the individual which nobody predicted that that was going to happen.
I don't know how often that's happened in history, but I imagine it has when they try to salvage something and you just pass out the money.
Why should people go and work for less?
And that's what it would take.
But in another area, the same thing is happening.
Banks right now are literally begging American people to take out loans.
They're flooding with money.
And the excessive reserves are put back into the Federal Reserve.
They hold and they get paid interest, which is rather bizarre.
But the banks would like to loan out the money.
And the money is there.
You know, capital should come from savings, an excess of what people made and didn't have to use to live on.
And yet now there's so-called capital.
It's not really capital.
It's just an excessive flow.
And the disruption that has come with this economic planning is such that people aren't ready to borrow a lot of money.
And if they do, it'll probably be for consumption, but not building railroads or what.
Even the building on the highways will be a government function, and it will be distorted by the fact that the money there will be divvied up by the politicians.
But anyway, it's sort of strange.
There's a lot of jobs out there going begging, and people are doing well without it because government's sending them a lot of money.
And the same way, the banks want to loan money to people, and there's not enough people that feel confident enough to do it, even if they don't have to pay any interest rates.
There's a hesitation because eventually somebody might have to pay back the principal, and that is when the big problems start.
But the mess that we have is here, it's going to stay.
But the good news is it's not unsolvable.
It is solved by some of the very strong hints that the founders gave us.
Property rights and contract rights, sound money and living within our means.
The other thing that would have to be done is that we would have to change our trade policy, our overseas trade policies, and not rely on protectionism and not rely on empire.
That is not a way to prosperity.
The best way for that to happen is for us to set an example by managing to allow people in this country to do what they think is best for themselves and their family.
It's doable.
We just have to establish those principles and get enough people to agree.
I want to thank everybody for tuning in today to the Liberty Report.
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