Ron Paul Liberty Report - Weekly Update --- The Federal Reserve’s Magic Trick: Big Tech
Aired: 2023-03-07
Duration: 04:30


=== Fed's Magic Trick, Big Tech (04:30) ===

[00:00:00]  Hello everybody and thank you for tuning in to the weekly report.
[00:00:04]  The Federal Reserve's magic trick, big tech.
[00:00:07]  Now you see it.
[00:00:08]  Maybe soon you won't.
[00:00:10]  Over the last year, the seeming ability of stock values of many technology companies to keep rising forever met resistance.
[00:00:19]  These were the result of both bad decisions and changing market conditions.
[00:00:24]  For example, the end of COVID lockdowns obviously reduced demand for Amazon's delivery services.
[00:00:33]  Also, an increasing number of people are leaving Facebook and other meta-sites for newer social media sites.
[00:00:40]  Many of those who use social media for political organization, education, or discussion are abandoning Facebook and YouTube for sites such as Rumble, sites that don't de-platform individuals for sharing opinions and news that displeases woke bureaucrats and politicians.
[00:01:03]  The magician in this scenario, the Federal Reserve, played a major role in big and medium and small tech's rise and fall.
[00:01:14]  Technology writer David Streitfeld, writing in the New York Times, recently examined how the Fed's 2008 market meltdown-related policy of near-zero interest rates led many investors to throw money at tech companies.
[00:01:31]  In many cases, these investors would not have bought tech company stock had the Fed not distorted the signals sent by interest rates, which are the price of money.
[00:01:43]  The historic expansion of the Fed balance sheet, thanks to quantitative easing, also helped create a tech bubble.
[00:01:52]  Now that the Fed is raising interest rates, although still keeping them well below what they would likely be in a free market, the tech bubble is being popped as investors are able to get a more realistic view of tech companies' values.
[00:02:09]  This is causing a painful but necessary correction.
[00:02:13]  For example, Carvana, which aimed to be the Amazon of used cars, went from an $80 billion valuation to a $1.5 billion valuation, a 98% loss in just 18 months.
[00:02:31]  Also, the Fed created tech bubble, allowed Amazon to lose millions of opening new businesses, including physical bookstores.
[00:02:41]  Amazon announced in March of last year, the same month the Fed started increasing interest rates that it would close all its bookstores.
[00:02:52]  The tech bubble enabled large companies to grow via mergers and acquisitions.
[00:02:58]  Many small and startup companies attracted investors with a promise of a big payoff for an acquisition.
[00:03:06]  The frequency of tech-related mergers and acquisitions is a major reason behind the left and some people on the right's renewed interest in antitrust laws.
[00:03:18]  Federal Trade Commission Chairman Lena Kahn owes her position to her advocacy of using antitrust to limit the growth of big tech.
[00:03:30]  Khan's crusade against big tech has suffered some setbacks in the courts.
[00:03:36]  However, Kahn need not worry since the Federal Reserve may do a more effective job of limiting tech-related mergers and acquisitions than the FCC ever could.
[00:03:49]  Sam Abusamed, principal analyst with Guide House Insights, accurately summed up the tech industry's recent history for Streitfeld's article.
[00:04:01]  The whole tech industry of the last 15 years was built by cheap money.
[00:04:08]  Now they're getting hit by a new reality and they will pay the price.
[00:04:14]  Federal Reserve created bubbles and busts are not a new reality.
[00:04:18]  They have been with us since the Fed was created and will remain until the system collapses or until Congress audits, then ends the Fed.