Ron Paul’s Texas Straight Talk: Bernanke’s Farewell Tour

0 Shares

Editor’s Note: This article by former Congressman Ron Paul first appeared at the-free-foundation.org, the temporary home for his weekly column until his personal web page is up and running. We are publishing it on Personal Liberty because of the impact Paul’s relentless criticism of Fed policy throughout his Congressional career had in bringing the Nation’s fiat money nightmare to the forefront of public debate.

 
[youtube=http://www.youtube.com/watch?v=Adu6wbvWwsE&w=853&h=480]

Last week Federal Reserve Chairman Ben Bernanke delivered what may well be his last Congressional testimony before leaving the Federal Reserve in 2014. Unfortunately, his farewell performance was full of contradictory comments about the state of the economy and the effects of Fed policies on the market. One thing Bernanke inadvertently made clear was that the needs of Wall Street trump Main street, the economy, and sound money.

Quantitative easing (QE) and effectively zero interest rates have created paper prosperity, but now the Fed must continuously assure Wall Street that the QE spigot will not be turned off. Otherwise even the illusion of recovery will disappear. So Bernanke made every effort to emphasize that the economy was not doing well enough to end QE, while lauding the success of Fed policies in improving the economy.

Bernanke was also intent on denying that Fed policies directly boost financial markets. However, the money the Fed creates out of nothing in order to buy mortgage-backed securities and government debt for the QE3 program, benefits first and foremost the big banks and the financial class — those people who are invited to the Fed auctions. This new money then fuels stock bubbles, bond bubbles, agricultural land bubbles, and others. The consequences of this are felt by ordinary savers, investors, and retirees whose savings lose value because of the Fed’s zero interest rate policy.

As if Wall Street favoritism and zero returns for savers isn’t bad enough, the Fed wants the rest of America to bear a greater inflation burden. The Fed thinks you should lose two percent of the value of your dollar this year. But Bernanke is not satisfied with having reduced purchasing power by ten percent since the 2008 recession. The inflation picture is actually much worse if we look at the old consumer price index —the one that did not assume that ground beef is a perfect substitute for steak.

Using the old CPI metric, as calculated by John Williams at Shadow Government Statistics, we’ve lost close to 50 percent of the purchasing power of our money in just the last five years. So what you were able to buy with the $20 in your pocket before the financial crisis costs more than $30 today. That might be peanuts to Wall Street, but that’s real money for working Americans. And it’s theft by the Fed. It is a direct consequence of the trillions of new dollars the Fed has “not literally” printed—as Bernanke put it.

Bernanke’s final testimony before Congress confirms that the Fed has blatant disregard for the extra costs and the new bubbles it is creating. The Fed only understands paper prosperity, not how middle class Americans and the poor suffer the consequences of higher prices, resources misallocations, and distortionary bubbles as well as insidious unemployment.

The only way out of this tailspin of monetary favoritism is to restore sound money, which would end the Fed’s ability to manipulate currency and put Wall Street first. The Fed has proven over and over again that it has no respect for the real money that preserves the value of people’s labor, their wealth, and their ability to live free and prosperous lives. It is beyond time for the Fed, Wall Street, and the federal government to stop manipulating money and stealing from the American people under the false guise of paper prosperity.

Personal Liberty

Special To Personal Liberty

You Sound Off! is written by our readers and appears the last Wednesday of each month. If you would like to submit an article or letter to the editor for consideration for You Sound Off!, send it to yousoundoff@personalliberty.com by the Friday before the last Wednesday of the month. To be considered, a submission should be 750 words or less and must include the writer's name, address and a telephone number. Only the writer's name will be published. Anonymous submissions will not be considered.

Join the Discussion

Comment Policy: We encourage an open discussion with a wide range of viewpoints, even extreme ones, but we will not tolerate racism, profanity or slanderous comments toward the author(s) or comment participants. Make your case passionately, but civilly. Please don't stoop to name calling. We use filters for spam protection. If your comment does not appear, it is likely because it violates the above policy or contains links or language typical of spam. We reserve the right to remove comments at our discretion.

  • bobj

    What is sound money?

    • marc

      Good question.

      In order for money, or anything else for that matter to be “sound,” it would need to have some important characteristics such as durability, fungibilty, divisibility. Also of importance, especially in relation to what is happening with the money printing due to fed policy, is that sound money cannot be easily counterfeited. Money printing is in essence, counterfeiting with the backing of officialdom — but still counterfeiting, nonetheless.
      Pulling money, or currency, from thin air to float the balance sheets of various banks is the maintenance of an illusion of monetary stability. All the digitally-installed currency now sitting on the bank balance sheets via the fed injections has not shown any real velocity yet because the banks are not lending the money and inspiring real velocity. But that must change at some point soon. The trillions of created fiat currency will move into the free market and show just how diluted the currency supply truly is via inflationary pressure. The dollar will show, as all fiat currencies eventually do, that it is not sound money.
      Only gold and silver, as well as other real assets, will have what is needed to demonstrate soundness during this time of turmoil for the dollar.
      Ron Paul is simply pointing to the fact that because the dollar is not backed by anything as real collateral, say gold, or even chickens and goats, and because it can be printed at the whim of the powers that be, to suit their interests — it is not sound. Simple macro economics.

      • bobj

        So an economy should be based on how much gold it can dig out of the ground? Doesn’t that strictly limit the size and ability to grow an economy?

        • momo

          It restricts the size of government.

        • marc

          You have a point but it’s so short-sighted as to equate to self-delusion.
          Or think of it this way, as you prescribe: “Though I am broke and using credit cards to pay my bills, including other credit card bills, why should I not use this new credit card offer I just found in the couch cushions to help my ability to grow economically?”
          Well, you can do that possibly to a point. But the market always seeks equilibrium and eventually finds it: The bills must eventually be paid.
          Having a paper currency with no real backing, no real collateral behind it, invites only opportunism and exploitation by manipulators who work full time moving the currency around in ways which you and I cannot keep up with for any stretch of time and effort we have available. The result is a serial-bubble economy, which never can really get off the ground to any sort of real sustainability. It’s like trying to construct a pyramid, with all the best engineering, science and materials available — but beginning with a foundation of hay bales at the base of the pyramid. No matter what real or unreal progress you put into the pyramid, it will not last without a real foundation capable of providing the essential real support.

          • Vis Fac

            You might want to think of the economy in aviation terms where you have money resembling atmosphere where at sea level the air is at its most dense i.e. money has its most value. Now we are airborne at 10K feet the air is thinner and the aircraft has less lift and more drag — money has lost value — The aircraft is still able to fly but works a little harder to stay aloft. The higher the aircraft flies the less dense (potent) the air and at one point cannot fly any higher which results in causing more drag (costs) and forcing the aircraft into a stall (falling) — printing more and more money is tantamount to having less air density (nothing to support further flight) if you diminish the potency (value) of money it cannot support the economy (flight) and we all crash and burn.

          • bobj

            Isn’t it just because people believe that gold has an intrinsic value that makes it acceptable as a medium of exchange? If people believe in tulips they become a medium of exchange. If people believe in paper, it becomes a medium of exchange. You must believe in something or we can only revert to a barter system, circa 1200 AD

          • marc

            You answer your own question if you just take a deeper look.

            Tulips, cabbage-patch dolls, air jordans, pokemon, etc. in spite of periods of extreme demand, where people, some, will pay extraordinary amounts and go to all sorts of extremes to acquire the items — these things don’t work out as long-term mediums of exchange because they don’t satisfy the fundamentals of durability, divisibility, fungibility. Look into these terms in relation to currency and money and you’ll begin to see.
            You’re correct in that “we must believe in something, or revert to barter.” We have believed in the paper dollar as a symbol of units of wealth for a long time. Originally, the paper was a certificate of symbolic representation of an amount of gold and/or silver owned by the holder. The paper was just a convenient symbol of real wealth.
            But after Nixon removed the dollar from the requirements of gold backing — or any backing of any kind — the dollar was loosed to the ones who knew how to manipulate it to their whims. That’s where we are now: The unwinding of a fiat currency. Has happened all throughout history, this unwinding and failure — an historical cliché in that all fiat currencies eventually go to zero. So with the removal of any backing of the dollar in ’71, we are right on time for history, the rhyme of History.
            Pssst. It’s also an historical cliché that the mass proportions of the populace are largely unaware of all the economic destruction taking place until long after the damage is done and they are hit with the real-life effects of the wealth-extraction techniques being wielded upon them. But it’s too late then to do anything about it.

        • Murph

          No …. it should be based on production. You need something to sell in order to earn money. WTF is wrong with education today?

          • Vis Fac

            It has been taken over by Political Correctness and liberal one dimensional idiot-ology Public Schools are now known as Liberal indoctrination camps producing functionally illiterate that can be easily controlled by the government and or lame stream media.

    • Vis Fac

      The clunk of a coin in a vending machine that fails to deliver any product.

  • Dcp5674

    So it seems Ron Paul’s warnings about the Fed are true, and we should have been listening to him for all these years. Imagine that.

    • Vis Fac

      The US economy was in trouble when Woodrow Wilson John D Rockefeller Paul Warberg Glass Carter Class and Franklin Delano Roosevelt (All DUMBOCRITES) initiated the Federal Reserve Bank on Dec 23 1913. This was an attempt to ward off future depressions as the one that occurred in the late 1800’s. This created a centralized banking system (again free enterprise is the victim) under federal auspices. We all know how government mucks things up and we haven’t had any depressions or recessions since RIGHT?

      • Dcp5674

        All Democramps? That explains a lot!

  • dan

    Hard to believe that Ron Paul has been has been saying this for
    nearly 30 years…and that so many have still not wakened to the deception.

    Well , the party is almost over and it won’t be long until a measure of wheat
    (The amount to make a loaf of bread) will sell for a days wage and three days ration of barley for a denarius (a silver small coin roughly 1/25 of a gold coin)

  • BHR

    All the money that the Feds have bought bonds and mortgages with will start hiting the streets soon. When this happens inflation is going out of site.

  • endofshow

    It matters nothing now. The die is cast, the people who have caused the problems are only interested in enriching themselves, every body else is collateral damage and irrelevant. Who caused this mess is of no consequence, because there is no solution and Bernanke will face the consequences just the same as everyone else. The only salvation is that most of us do not have so far to fall. Let’s wait and see if these fraudsters bounce when they hit the wall.

    • guest

      No bouncing only splatting Sheet splatters when dropped