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Feb. 4, 2022 - Ron Paul Liberty Report
27:24
Beware of These 4 Most Dangerous Fed Fallacies

While the Fed, and all of its cheerleaders engender false confidence from the public, they also have false confidence in themselves. That which they believe they can control, they ultimately cannot. Manipulating interest rates and counterfeiting dollars may seem to create short-term benefits, but always at the cost of long-term economic ruin. The long-term always arrives, and always when it's least expected by the "experts."

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Fed's Limitations Revealed 00:15:10
Hello, everybody, and thank you for tuning in to the Liberty Report.
With us today is Chris Rossini, our co-host, Chris.
Welcome to the program.
Great to be with you, Dr. Paul.
Good.
There were a lot of announcements this morning before our program, and the markets are digesting it because there was an announcement on unemployment.
And the unemployment rates went, you know, way down, but fantastic.
Many, many jobs created more than anybody expected.
And it sounded like great news, but this indicates how the reaction is on Wall Street, depending on dealing with what will the Fed do about it.
You know, in an ordinary sense, that if you were in a free market or you had a sensible Fed that knew something, you'd say, oh, there's a lot of employment.
This is very good.
The market should soar.
But exactly the opposite happened.
Who knows?
They may be back up already.
But the initial reaction was for the market to go right down because the market players, the people who want to jump on every bit of information, they said, oh, you know, the market's doing better.
This is good news.
So that means, let's see, what does that mean for the Fed?
Oh, the Fed will have license now to inflate because they are a little worried about the prices going up.
You know, oil is up to $92 a barrel, which is something nobody even talked about today.
But anyway, the interesting thing in that something we want to talk about today is how the Fed operates.
What do they know?
And why are their reactions?
And then how do the millions and millions of people and billions, if not trillions of dollars being shifted around on one word or one interpretation?
And the truth is the Fed really doesn't know exactly what they're doing.
And it's guesswork.
And that's also why there's such chaos.
And I think one of the basic things, Chris, that they have wrong, and we'll talk about the many basic fallacies that we think exist.
And that is the inability to identify with a unit of account, which means, can you define the unit of account?
And most people say, what are you talking about?
Well, it used to be a long time ago, you know, for many, many centuries, there was a unit of account and it was a weight of gold or silver.
And the most long lasting was a weight of gold.
And that was the unit of account.
And they would measure things and that sort of settled things and smoothed things out because there's tremendous number of transactions between supplier and consumers and how to come together, you know, the visible hand, how does it work?
And how do you make these calculations?
But you have to have a unit of account.
And I always make the analogy that this is like trying to build a skyscraper and you don't have a unit of measurement and it doesn't work out so well.
So they're trying to build an economy without a unit of account.
And one of the most important things on that, of course, would be once you get the unit of account, what do they charge?
What is the interest rate to move it around?
So Chris, I think there's several things that we can talk about today, the fallacies that go on.
And I think that's so important.
The fallacies are the beliefs they have, the economic beliefs.
And we're not challenging the Austrian economists, the free market economists, hard money economists.
We're challenging, you know, probably nearly 100 years of Keynesian type of economic interventionism and the declaration that fiat money is okay.
That's what we're challenging.
But there's been many fallacies that have been preached at our universities and many fallacies that they practice that leads to this chaos that we have.
And the way I see it, Chris, is that it's not just the Fed that messed things up now, because it was this additional problem thrown in with intervention in the economy and the lockdowns and the things that we have talked about on this program for a long time, because that has caused a lot of pain and suffering as well.
Chris?
Right.
And part of the pain and suffering that we're all experiencing is the price inflation, you know, with gas prices, food prices.
These are very important prices.
But the way to avoid this is for the Fed not to counterfeit money or manipulate interest rates.
But that's why the Fed is there to manipulate interest rates and counterfeit money to finance the government.
So the moment that the Fed starts this process, they assure that there must be at some point a recession or depression in the future.
This is unavoidable because we're dealing with economic laws.
So when they artificially push down interest rates, you know, we don't have real interest rates and inflate the money supply, they create a bubble.
When the prices go up and they want to fight those price rises, they'll raise interest rates and pop the bubble.
It's not hard to understand.
And they believe that they can control this process.
And it may appear that way for a while.
You know, it's been a while.
The Fed has been around for a while, but ultimately they reach a point where they can't.
And we got a good glimpse of this back in 2008, where these monstrous, monstrous, major brokerage firms, Lehman Brothers, Bear Stearns, not only did they take a hair, they disappeared completely.
That just shows that they're operating under an illusion.
And today, we're in a much, much worse position than back in 2008.
And think of all those firms that just disappeared.
So it's an illusion, just like the bubbles are an illusion.
The only way to avoid this is to have sound money.
It's not very complicated.
Very good.
And, you know, the dilemma that so many people now are talking about, because even the establishment financiers and bankers, the people who like it, like their largesse license smooth and come to them, and that's why they like the Fed.
But right now, there's an unease because they believe the Fed has lost control and they can't predict what's going to happen.
But I think what they're doing right now, everybody's recognizing this, and they said the Fed is trapped because the price inflation is there and they know how big a political issue that is.
And the people are reacting to it.
And of course, our beef is the people who are reacting are saying, well, the government needs to give them more money because our prices are going up rather than sorting it all out.
So the Fed, though, said, and they usually refer to Volcker, some of the circumstances that happened in the 70s, and Paul Volcker had the guts to come in and make the changes at that time actually improve things for a while longer.
And that was to bring on a recession.
So it's always so ironic that at this stage, and at the stage it was in 79 and 80, was the purpose of the Fed was to lower prices.
And they did that by, you know, making the markets weaker, bring on a recession, depression.
And they were dumbfounded back then because they called it stagflation.
What is that?
Well, we were always taught that, you know, if you have inflation, then the employment rate is improved, you know.
But they figured, we'll just do this and that will take care of it.
But the other thing is, if they don't do, if they don't bring on the recession, then they say they're going to have too much inflation.
And these conditions don't exist in free markets, maybe to a minor sense, but you don't have five, six, seven people, whoever is involved in monetary policy.
You don't have that because the assumption that most Austrian economists and free market people say is, how do they know?
They don't know what the money supply should be.
But, oh, but we'll regulate it and we'll figure it out and we'll calculate it.
And we have these charts.
We have this equation to work out.
It's 17 pages long and that'll tell us exactly what the interest rates should be.
But people are right.
Like right now, people are losing confidence that the government has the vaguest idea about what COVID is all about.
And I think a lot of people right now are saying the Fed are between the rock and the hard place.
And this is what they're struggling to do.
They're struggling to try to find out and give us information that they don't have because they don't know it.
And that's why the chaos is going to continue.
Because my prediction under these circumstances is even though Volcker did it to a reasonable amount of success, he brought on a bad recession and that calmed the markets down.
I don't think they're going to purposely raise interest rates, to purposely have a recession, to purposely put a dent in rising prices.
I think they're not going to bring on the recession.
I mean, there'll be a recession, but they're not going to do it with raising interest rates.
They're going to give in and just keep printing.
So the recession will still come and the stagflation is possible.
And you can have inflationary depressions as well.
People say, well, if you have depressions, there's low demand.
The prices have to go down.
But well, what about Bolivia and Zimbabwe and Venezuela?
They have tremendous inflation, but a very weak economy.
And the weak economy, did that bring down prices?
No, it destroyed the value of the money.
So they are in a dilemma, but it'll be interesting to see.
Unfortunately for me, I'm fascinated with this because it's psychological.
How are they going to react?
What are they going to do?
What's the market going to do?
And it's all unpredictable.
So you can have a guessing game, but it's not good economic policy.
Let me tell you what we're doing here.
We're living on the edge of a very dangerous situation, Chris.
Absolutely, Dr. Paul.
And speaking of psychology, they've done a fantastic job of fooling people into believing that the stock market is it.
You know, as long as the stock market is up, everything is fine.
And everybody walks in lockstep.
The media, if you turn on the TV, they'll tell you about the stock market, the record, Dow.
You pick up a magazine, your professor at college, everybody gets the same message.
So you could be down to your last crust of bread and they will tell you that everything is great.
Look at the Dow.
Boy, isn't everything great.
And, you know, the wealthy people, they don't care about rising prices.
It affects people like us, you know, because they make up for it.
They're the ones in the stock market.
The average person doesn't care about the stock market.
They're not making funny money.
So the price rises affect everyone.
That's why there's a disconnect between people that are making their money in the Dow versus those who have no interest in it whatsoever.
Now, that's not to say that that's not to put down stock market per se.
The stock market is very, very important, especially if there was a free market economy.
It's a wonderful way to allocate and reallocate capital.
But the stock market has to tell you the truth.
It has to tell you the truth about supply and demand and the state of the economy.
We do not have that today.
Our current system is illusions.
Things look great.
Like Dr. Paul said, you know, it's illusionary.
And the only way to get rid of this fantasy world illusion is again to have sound money and free markets.
You know, I want to talk a second about the deceit that goes on with this.
And you alluded to it, because they're not going to level with us.
Oh, we're sorry.
We don't know what we're doing.
So let's just quit this nonsense.
But basically, in the Federal Reserve Act, they specifically mention that their job is to provide stable prices and also high employment.
And today's report said, wow, employment's going way up in spite of all the crazy things going on.
But prices aren't stable.
So they haven't accomplished that yet.
But they've actually added in recent years added a third function.
And this is closer to admitting the truth that they should be concerned about long-term interest rates, which justifies as QEs, you know, buying all these bonds and things that they do.
And they own so much of that already.
So they really have three things.
But the fourth one is probably the one that drives the markets and drives the Fed, but they don't admit it and they don't put it out in the writing.
But their goal is to keep the stock market up and keep rich people rich.
I really believe that.
That doesn't mean that there's no spillover and that doesn't mean every rich person is going to benefit.
But the super rich benefit tremendously from this.
And it's usually some people can pick out 1% of the top or 5%.
But one thing that we know, the bottom half and maybe the bottom three quarters suffer from this type of economy.
But my point is, is the market really, this is the interference.
And one of the number one, probably the number one purpose of the Federal Reserve under current circumstances is to take care of the wealthy by manipulating the stock market and making sure these stocks go up.
And already, you know, in spite of, you know, the market surviving and people surviving, you could see even some rich people can lose under these shaky markets.
There's too much imbalance.
So they will have a job even carrying out this.
They're not going to be able to carry out stable prices or deal with the unemployment.
That's all going to get worse.
So they're not accomplishing what they pretend to accomplish.
But as of now, a lot of rich are benefiting and a lot of rich will continue to benefit.
But that to me is one of the most dangerous things going on because that causes the conflict between the rich and the poor and the middle class and sets the stage for the Marxists to move in.
And see, we told you freedom doesn't work.
That's why you need to join us in the effort to promote Marxism.
Yes, Dr. Paul, that is a scary prospect.
And they look for openings like that.
And they'll easily claim this free markets.
This is freedom.
There's nothing of the sort, not even close.
You know, this week, we just saw a new milestone was hit by our fiscally conservative government.
Debt Cycle Mystery 00:11:08
They hit 30 trillion in debt this week.
I mean, what a scheme they have going.
They just pay off old debts with new debts.
And they think that they can do this forever.
And some of them may say, well, look, it's 30 trillion.
What's unsustainable?
When does it stop?
And no one could possibly know the answer to that.
But it's best to look around.
Let's see how things are.
Look at the mentality of the people.
They think that what government does is free, free jabs, free masks, free stimulus.
All this free stuff is not, it's not free at all.
And so many people in our country have been accustomed to having their hands out.
Give me more free stuff.
I have a right to it, they claim.
And it's not just individuals, it's companies, it's states that need bailouts.
It's other countries that the U.S. props up.
It's such a massive thing that they have going.
And when you do this, the demands only get greater.
They never go down.
The more handouts, more free, so-called free stuff you give, the more hands will appear in your face.
So it ultimately just spirals out of control, and the gears have to grind to a halt.
We are not any more special than anybody who has lived in all of human history to think you could pull this off forever.
You could pull it off for a while, but ultimately they will grind to a halt.
And there's going to be a lot of surprised people to find out that the government really has nothing else to give.
Chris, it's a very important item that you brought, the issue of debt, because you can bring all this together if you think just about the debt.
Why is it there?
Who benefits and how that interferes with the markets and how it interferes with economic growth?
Because debt is a big item.
And right now, if you look at what's happened the last decade, it's unbelievable.
And this whole thing that now the national debt has popped up over $30 trillion.
Nobody visualizes it.
It's the debt doesn't matter.
But there's a purpose in this.
There's a fallacy in this because especially you hear it, I hear the charge from the socialists and the Marxists in the Congress because they say this is good.
This is good.
And even the Fed, even the Fed, how many years did they talk about our purpose is to get the interest rates up, you know, prices up.
We need more inflation, at least 2%.
And what they're talking about is devaluing the currency and the value of their currency of all people who might save their money, you know, and act like a human being.
The 2%, that was their goal.
And all I could think when every time they said 2%, 2%, when it hit 2%, it's gone.
It was lasted for about one day.
The next number I heard was 5%.
And now we have to talk about 10%.
But the purpose of it and the reason why they want inflation, they think it's okay, is they know debt is bad.
So you have to pay off the debt.
And the market demands that it be liquidated.
Now, a lot of people say, well, you know, we have to raise the national debt or the checks will bounce.
No, they never allow that to happen.
The checks aren't going to bounce, but the value of the money is going to bounce.
So they print the money and at 2%, the real debt goes down.
So if you double the money supply, this is just theoretic, double the money supply and increase prices, you know, doubling all prices, then all of you said, oh, oh, there's the real debt has gone down by half.
So the real debt goes way down.
And that's what they're doing.
They're liquidating debt because you can pay it off with cheap money.
And they actually talk about that.
This is a good time to borrow money because you can pay it back with cheaper money.
Well, even that doesn't tempt me to want to do it because I think that the debt has to be paid.
So how does the market will do it with the devalue and the government will do it with devaluation?
But people who worry about getting a Congress and a president to vote to cut spending and live within our means, that is not going to happen.
So the option is either an individual can work harder, spend less, get another job, and work off their debt, which a lot of people still do.
But governments don't do that.
What they do is they print the money.
That's why fiat money is so popular by most individuals.
Even those who receive the large estate at the lower end of the scale, they like it too, not realizing they'll pay all the bills on the spending.
The debt and the deficits are paid for by higher cost of living.
And poor people, percentage-wise, pay most of the debt.
So the poor people get the inflation debt.
And all they can, with all the education that we've given young people and Keynesianism, and the universities are filled with it, this is good because the debt is going down.
Of course, the poor suffer and the rich get richer.
And that's what I think is so dangerous.
So the whole thing there is that debt will be liquidated.
The government, people worry, oh, we have to raise the national debt or my social security check might not come.
No, you're going to get your automatic increases on it, but you won't have control of because the government doesn't have control of it.
The market is too powerful.
And that means this system will demand that the purchasing power of the so-called unit of account, the Federal Reserve, is going to go down.
And that will be tragic.
Yes, very good, Dr. Paul.
I'm going to make my closing statement now.
You know, I have to ask our viewers and listeners: did you ever wonder how a government that's 30 trillion in debt, they're constantly coming up with new spending as if they're not.
You know, you hear about green new deals and build back better and trillions and trillions, and you think, how is this possible?
You don't have any money.
How are you going to pay for all this?
And it's not like we get a bill in the mail.
We don't go out to our mailbox and say, here's your portion of the Green New Deal.
The Fed prints the money.
That's how they get the money.
They don't care about 30 trillion.
As long as this thing's going, they're going to keep going.
But the bill, that doesn't mean there isn't a bill.
As Dr. Paul pointed out, we see the bill when we go to the supermarket, when we go to the gas station.
That's the bill.
When you have these rising prices, there are no free lunches.
But what this system is, is a government that has no financial restraints.
Whatever they want to do, the Fed will accommodate.
They'll print the money for it.
And when you have a government with no restraints, you eventually will have people in those governments who believe they have no restraints whatsoever, not just financial.
And look at COVID, how they treated everyone.
They believe that they have no restraints.
They'll tell you to sit in your house and that's it.
Now, of course, in the end, there are financial restraints.
It's called economic laws.
It's called supply and demand.
And when the time is up, the time will be up and it will be a major adjustment for everyone.
The people in government, the people relying on government who believe them this whole time.
We're here to just provide the alternative.
First, explain the truth, but also to provide the alternative ideas.
We need sound money.
No one should be ever allowed to counterfeit, just like our founders wanted.
We need free markets, separate corporations from the government.
Right now, they are attached to the hip and everybody can see it.
And finally, and most importantly, we have to, as Dr. Paul has championed for all these years, audit and then finally end the Fed.
Okay, very, very good, Chris.
And I'm going to close with talking about an additional factor that is used in a different program that is used to manipulate the Fed to protect the very wealthy.
This has to do with the collusion between the financial markets, which is more direct and more open now with the Federal Reserve.
And what I'm talking about is Larry Fink and BlackRock.
They are under management, the largest management of investment funds of anybody.
And it's over a trillion dollars that they manage fund.
But they also, Larry Fink works in collusion with the Federal Reserve.
He actually plays a role in it.
He's part of it because he has a lot to say about the distribution of the day, daily activity, where the money goes.
Because, you know, most of the money that bails out the economy or supposed to occurs, you know, in secret.
It's just Fed doing it behind the scenes to the tune of trillions and trillions of dollars.
Yes, the Congress gets involved and they pass a bill here or there, but it's a collusion between corporations.
It's part of this whole idea of the purpose of the Federal Reserve is to protect the very wealthy.
So that is going on constantly.
And the one thing that is very sinister and we should all be concerned about is the appointees to the Federal Reserve Board, as well as the appointees to the Supreme Court.
One of the tests they have is they have to be woke.
It's the wokeism.
Larry Fink is part of that.
They're part of this radical environmentalism to use this to emotionalize the issue so that they can do these things.
And of course, the administration is locked step in there.
And anybody who gets appointed, I have to be woke.
And we're starting to see the backfire of this.
You know, part of the wokeism was Black Lives Matter.
They were interfering there with Soros, pumping that money in.
And look, at least they got caught.
They're in a little trouble, but the penalty will not be very, very severe.
I'll tell you, I think it will be minor compared to what happens if somebody commits a crime and they go and they demonstrate at the U.S. Capitol.
You get locked up forever if you do something like that.
So this whole system is directed.
And these items that we talked about today that motivated me early on when I first started studying this, especially in the time of before the Brenton Woods broke down in 1971 on the importance, the overwhelming importance of controlling a very powerful currency, a world currency as the reserve currency of the world, at the same time,
Americans Remember 00:01:02
and having a powerful military and can sort of run the world.
But that's coming to an end too as the economy crumbles.
I think the power and the illegal, immoral approach to us in the international world by starting worlds, wars, you know, we worry about a coup.
There was a coup occurring on January 6th.
Do you have any idea how many coups we participated in over the last 70 years?
One of the biggest ones that has caused trouble to this day was getting rid of Mossadegh in Iran in 1953.
I mean, that's what really started it.
And they remember that.
Americans don't remember very much about history.
But I'll tell you what, there are some people in the Middle East that believe they've been mistreated by us.
They never forget.
And we have to remember that.
We have to get people to remember what it was like in America when we were a free country.
I want to thank everybody for tuning in today to the Liberty Report.
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