End the Fed

Ron Paul, End the Fed

I just finished Ron Paul’s book, End the Fed. His thoughts on the economy and our monetary policy are very intriguing. Whether you totally agree with him or not, his points definitely make you question the status quo when it comes to these important issues.

He really makes you think. Which is something a lot of us don’t know how to do anymore when it comes to things like central banking, credit, inflation, and fiat money because we don’t understand how they work. It’s all magic to us. He also does a good job of educating and explaining some of these fundamental (and sometimes complex) economic principles. And he tackles them from a moral, practical, economic and constitutional point of view.

The more time that goes by, the more sense Ron Paul seems to be making (he’s been predicting the Greece catastrophe for years). Personally, I think he is one of the last honest politicians (I know that sounds like an oxymoron nowadays). He doesn’t seem to be swayed by lobbyists, money or public opinion. And he’s consistent and doesn’t play political games. He’s just always been Ron Paul. And that’s something that everyone can respect, regardless of belief.

“The flowering of human society depends on two factors; the intellectual power of outstanding men to conceive sound, social and economic theories and the ability of these or other men to make these ideologies palatable to the majority.” – Ludwig von Mises

The problem is that our leaders spend their time making B.S. palatable to the majority, rather than sound social and economic theories.

“In my opinion, the political leaders must make the ideology acceptable to the people. Of course, the ideology of welfare and socialism is easier to sell since it’s based on the majority getting something for free. But when the people recognize that’s only a temporary situation they will become more open to the suggestion that freedom offers more, once the bankruptcy of statism is acknowledged. Such a condition is becoming more apparent every day. […]

The more socialized the society, the less the sense of personal responsibility for one’s own behavior; responsibility becomes collective. Interventionism conditions business people to believe they can enjoy the rewards of the market, yet pass on the penalties to others. That’s what’s happening today.” – Ron Paul, End the Fed

The following are some more good quotes from the book.

To sum it up:

The Federal Reserve should be abolished because it is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty. Its destructive nature makes it a tool of tyrannical government. Nothing good can come from the Federal Reserve. It is the biggest taxer of them all. Diluting the value of the dollar by increasing its supply is a vicious, sinister tax on the poor and middle class.[…] But the people endorse the system because they have requested and expect government to provide benefits that can’t be provided any other way.

One of the fundamental problems:

“The market, though not perfect, minimizes unsound lending practices. Both borrowers and lenders are much more cautious when the risk is borne by the two parties involved rather than protected by the proverbial safety net. In a structured social welfare–interventionist state, no one becomes solely responsible for his or her own actions. The penalty is diluted and hidden from the victims. Benefits are seen, costs are delayed and difficult to identify. Politicians thrive with arrangements like this, at least until the truth is revealed in the painful period of a correction. If individuals aren’t responsible for their actions as the bubble forms, the responsibility falls on others and to a future generation. Taxpayers, eventually, must foot the bill. High prices, a consequence of inflationary policies, act as a tax on everyone, but hurt the poor and the middle class the most. All bailouts are dependent on the Fed to create new credit out of nothing, the very policy that caused the mess in the first place.”

Being a political insider, he gives a good account of the inside politics:

“Trading votes for constituents’ benefits is routine. Being a “team player” is necessary to gain a plush committee assignment, and the committee assignment is the vehicle for raising money since one’s committee votes are even more valuable than the floor votes that come after the deal has been done. Participation in conferences to resolve the differences between the Senate and House versions is a real attention getter for those who contribute or buy influence in the process.”

“With all the bailouts and nationalization going on, it’s more important than ever that one has access to those in power. The process builds on itself. Just as inflationary bubbles expand, political power structures pyramid on themselves as the role of government grows. To put it simply, the system is morally corrupt. Politicians should nevertheless resist the temptation to participate. Rationalizing that others do it—that’s the way the system works—is unacceptable. Sadly, avoiding discovery is the hallmark of a successful politician.”

“The big problem is that many immoral acts, including the inflationary process of a central bank, can satisfy a lot of people for very long periods of time.”

On the poor:

“But we have been conditioned that morality is on the side of the redistributionists who grab the moral high ground by arguing that they alone care for the unfortunate and are merely making the system fair. They argue that, without this system, economic suffering would be overwhelming and unfair. Of course, an understanding of how freedom provides for the needs of the greatest number of people totally refutes this notion.”

“Spending on housing programs and Federal Reserve–driven low interest rates are designed to get more people into homes of their own. The result is that government bureaucrats and politicians benefit. Builders, bankers, mortgage companies, insurers, and developers thrive, and when the bubble bursts, the poor for whom the programs were designed lose their homes and their jobs. This is true in every government-subsidized program, including medicine, banking, education, and agriculture. Fiat money looks like a panacea. The results are tragic: poverty and chaos ultimately ensue, and powerful special interests demand a bailout from the victims.”

On risk compensation and a false sense of security:

“The idea that we can depend on the SEC to protect us significantly contributes to moral hazard. More risks are taken believing the government will protect us, and our guard against evil is diminished.”

Do we really need the Fed? Congressman Paul doesn’t think so:

“People worry what would happen in a world without the Federal Reserve. My answer is that you would enjoy all the privileges of modern economic life without the downside of business cycles, bubbles, inflation, unsustainable trade imbalances, and the explosive growth of government that the Fed has fostered.”

Money should just be another commodity in the market:

“We should think of money as nothing more than it was at its origin: a market-created good that emerged out of trade. The most valuable commodity in society, the one good that could be traded for all other goods and thereby help facilitate complex exchange, emerges as money, whether that be beads or animal skins or jewels or precious metals. Gold became money because it had all the properties people look for in a good money. Government had nothing to do with it.”

How much should the government be restrained?

“We have a natural, God-given right to our lives, our liberties, and the fruits of our labor. Protecting those rights is the only role that government ought to have in a free society. To restrain the government from doing more requires a morally determined people willing to assume self-responsibility, rejecting dependence on government force to mold the economy, society, or individual behavior.”

Lots of food for thought! And he gives a good list of suggested economic reading at the end of the book that I intend on adding to my reading list as well.

It’s a good read. I definitely recommend it – especially if you disagree with him.

4 comments Add comment

Cindy May 13, 2010 at 8:25 am

I think it’s important for us to be attentive to what our Holy Father, Pope Benedict tells us about our obligations to the poor, rather than rely on Mr. Paul for guidance.
You have provided us with extensive quotes from this book, but nothing from the Gospels. Frankly, I am uncertain what this post has to do with being Catholic in America today.

Albert Bloomfield May 13, 2010 at 8:47 am

Great post! End the Fed! Bring back the gold standard!

As for the comments by Cindy, if they are our obligations to the poor then we really shouldn’t rely on the government to care for them, should we? There’s a Swiss economist Roepke who has some interesting ideas about how to provide for the vicissitudes of life without becoming socialist (because socialism doesn’t actually work).

Also, is Cindy saying we need the Fed? Did the Holy Father ever say that we need a central bank? or that it helps the poor? I really don’t understand her point. The Fed is bad for the poor because of their inflationary policies. We need a gold standard to keep the government honest — otherwise it’s too easy to just inflate the money supply.

Matthew Warner May 13, 2010 at 9:11 am

Cindy, no problem – let me explain! I agree we should listen to the Pope…and the whole of Catholic teaching. And I absolutely do. This post concerns the matter of the way that we morally accomplish what Church teaching reveals to us.

These quotes deal with how to have a strong economy that is protected from political corruption. How to protect the poor from being taken advantage of by the government and other powerful people/businesses – as they currently are. They address the immorality of inflating the money supply and all that goes with it. And how to respect and protect our personal freedom (and therefore genuine charity) now and in the long term. These are all fundamentally important to living out our Catholic faith – and especially as Catholics in America today.

The fact that so many people fail to see the connection between all of this stuff and effectively living the gospel is why we need to try to understand this stuff a lot better.

Albert – Thanks! And I’m with you on the Gold Standard!

Christian May 13, 2010 at 8:13 pm

I’m reading How Evil Works by David Kupelian. It’s not necessarily a Catholic book, but he examines and explains the mechanisms behind so many problems in our society from a deeply Christian viewpoint. Definitely an important book… they say a fish would be the last one to discover water, so in a society so desensitized to evil, we need books like this!

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