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Nov. 10, 2010 - Freedomain Radio - Stefan Molyneux
09:49
1787 The Federal Reserve Is Screwing Us Again!
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Paul Krugman, one of my favorite state-sucking ass-clown lackey-toadies of the ruling classes, wrote on November the 7th in an article called Doing It Again about Fed policy.
He writes, eight years ago, Ben Bernanke, already a governor at the Federal Reserve, although not yet a chairman, spoke at a conference honoring Milton Friedman.
He closed his talk by addressing Friedman's famous claim that the Fed was responsible for the Great Depression because it failed to do what was necessary to save the economy.
You're right, said Mr.
Bernanke. We did it.
We're very sorry. But thanks to you, we won't do it again.
Famous last words, says Mr.
Krugman, for we are, in fact, doing it again.
It's true that things aren't as bad as they were during the worst of the Depression, but that's not saying much.
And as in the 1930s, every proposal to do something to improve the situation is met with a firestorm of opposition.
And criticism. As a result, by the time the actual policy emerges, it is watered down to such an extent that it's almost guaranteed to fail.
We've already seen this happening with fiscal policy fearing opposition in Congress.
The Obama administration offered an inadequate plan only to see the plan weakened further in the Senate.
In the end, the small rise in federal spending was effectively offset by cuts at the state and local level so that there was no real stimulus to the economy.
Now the same thing is happening to monetary policy.
The case for a more expansionist policy by the Fed is overwhelming.
Unemployment is disastrously high, while U.S. inflation data over the past few years almost perfectly matched the early stages.
of Japan's relentless slide into corrosive deflation.
Just for those who don't know, this is in the late 80s and early 90s.
There was a real estate boom in Japan, followed by massive government intervention to attempt to stabilize the economy, which has resulted in pretty much two decades of stagnant or declining growth.
A last generation of outsourced, underutilized, vacant workers' lives destroyed.
And he's basically saying that we're doing all of this Unfortunately, writes Mr.
Krugman, the conventional monetary policy is no longer available.
The short-term interest rates the Fed normally targets are already close to zero.
By the by, this is why banks aren't lending to businesses, because the Fed has driven interest rates down close to zero, which means that the best way that the banks can make money is to borrow money from the Fed at almost zero percent and then invest it in T-bills or government bonds or other kinds of instruments which return a couple of percentage points.
It's a guaranteed three or four percentage point increase.
They'd rather do that, especially when the business climate is so unstable, rather than invest in businesses.
The government says, oh, we want the banks to invest in businesses, but they're making it unstable on the business end and highly lucrative from the Fed end, so of course the banks aren't going to do it.
Words, words, words, words.
Once we move past words, we get to reality, which is, in the government world, the opposite of the words.
So, he writes, the Fed is shifting from its usual policy of buying only short-term debt and is now buying long-term debt, a policy generally referred to as quantitative easing, which does sound like a laxative, as I said before, and not one which you take Orally.
The quantitative easing is just counterfeiting.
I mean, this is all the words that the government uses for that which is illegal for everybody else.
And it's causing a firestorm of criticism around the world.
Why? Because all of the people who've invested in U.S. debt, who have taken partial ownership of the tax livestock called you, For the future generation, all of those people are very upset with the Fed buying half a trillion dollars or more of its own money printing money out into the economy because that means that the US dollar is devalued,
which means the people who hold ownership over you, the Chinese, the Japanese, the Europeans, and others, the people who own you, when you pay your taxes in dollars that are devalued, those tax dollars are then going to flood out of these people overseas and some domestic.
They're going to be paid back in dollars worth much less than what they invested.
So they're very, very upset that the Fed is currency printing, is debasing the currency, and that is going to have, of course, some effect on things.
I mean, you can go on, and I'll post a link to this below.
It doesn't really matter.
You know, I mean, it's hard to know whether to react with scorn, rage, desperate sadness.
But I'm actually tending towards a kind of...
And I think this is the final stages of a dying system.
I actually, I can't even feel that angry.
Have you ever seen in malls, they have these, in toy stores, which, you know, I have a young daughter, so I frequent toy stores, which is a lot better to do when you have a young daughter.
They have these little cars.
Here, I'll put one up here. They have these little cars, and they kind of go round and round.
You wind them up, and they're battery-operated.
You switch them on, and they tumble up one side of the wall, and then they go down.
They tumble up another side, and they never get anywhere.
Of course, they just go round and round, and I guess this is entertaining for people who aren't hard to entertain.
But when you look at intellectuals talking about the government these days, it's that sad.
It's that pitiful.
It really is desperately, desperately sad to see them do this.
So Krugman is saying, well, the Fed fucked us up in the 1920s and 1930s.
No question, anybody with any brains to see, you can read Friedman, you can read Rothbard, you can find all the information.
I mean, it's a done deal. It was a Federal Reserve policy that caused the exuberance of the 1920s, followed by the Depression of the 1930s.
It was government programs and controls and tariffs and taxes that extended the Great Depression almost 13 years until the Second World War.
When capitalism was saved not by war but by the relinquishing of government controls and the repealing of government acts like the works program that returned a huge bunch of money to the free sector of the economy which allowed it to generate jobs after the Second World War.
Fed fucked everybody up in the 1920s and the 1930s.
The quote Federal Reserve, the government manipulation of policy in Japan, has resulted in two decades of lost growth.
The exact same indicators are happening here.
And this is all from Krugman's article.
He's admitting all of this.
Anybody with three two-pie brain cells rolling around a cavernous-stated, indoctrinated, empty skull-hole of a head would think to himself, well, gosh, here we have, in a space of sort of 80 years, or you could say 90 years, I mean, we've had a 97-98% devaluation of the currency.
We've had a fiscal system that regularly bubbles and bursts and crashes.
Every five years or so.
We have the example of America, of England, of Europe as a whole.
We have the example of Japan going into catastrophic decline.
So anybody with a few itches of brain cells to scratch with a non-indoctrinated claw would actually You know, sit and think to himself, maybe, maybe I should not nag the system to do better.
Maybe the problem is the system.
Is the system.
Can this be conceived of by these indoctrinated state-ass greasing robots of empty-headed conformity to the wills of those in power?
Of course it can't be.
They can't even think of such a thing.
Because they can't look and say...
They look at the purpose of the Fed, to stabilize the economy, to balance out the boom and bust cycle, to manage interest rates, to manage currency.
I mean, they look at the business plan, and they say, well, that's its job, and it's not doing its job, because that's what it says it wants to do.
It's not doing its job, so I need to nag it and finger-wag it until it does its job.
Which is like looking at the election platform of the Nazi Party and considering Genocide and war are some sort of departure.
The purpose of the Fed is to print money for those in power.
The purpose of the Fed is to buy votes from the financial sector in return for providing them bailouts.
And allowing them to scoop the rise and dip, the wave and trough of the endless business cycle, which is entirely the result of the Fed manipulation of currency and interest rates.
It is to allow the taxpayers to be fleeced.
The Fed is the agency that holds you down.
While the state takes out your fiscal kidney.
I mean, that's the reality of the situation.
But they can't think about the possibility that the agency is a mere corrupt tool of power because Paul Krugman and others like him are themselves slaves to the ruling class and corrupt agents of power.
We've just got to let this stuff go.
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