End the Fed, by Rep. Ron Paul (R, TX): on Budget & Economy


Hank Paulson: 2008 downturn in housing market caused crisis & recession

In mid-2008 Secretary of the Treasury Henry Paulson simplified by saying that the downturn in the housing market has caused all the trouble. He and others concluded that the government should stimulate new housing and do whatever possible to keep the prices of houses from falling. They contended that since house values were dropping, the mortgages and the many derivatives associated with securitization had become liquid, and bailing out this market would reverse the deflationary process.

But--and this is crucial--focusing on the housing market alone was just the last in a parade of claims about the root problem. There are other sectors that have suffered, in finance, car manufacturing, services, retails, and stocks. These are all merely symptoms of a deeper problem: the Fed and its role in sustaining an unsustainable paper-money system.

I was intrigued to see that even the Treasury secretary senses that, at some level, the crisis is connected to central banking.

Source: End the Fed, by Rep. Ron Paul, p.124 Sep 29, 2010

Milton Friedman: The Great Depression was the fault of the Federal Reserve

Bernanke's comment to Milton Friedman at a dinner honoring Professor Friedman's ninetieth birthday on November 8, 2002, reveals it all. He apologized to Professor Friedman and said Friedman was absolutely right--the Depression was the fault of the Federal Reserve. It wasn't the fault of the central bank managing a fiat currency or participating in credit expansion or debt monetization; the problem lay only with the Federal Reserve's inability or unwillingness to inflate the currency early and massively starting in 1929.

Bernanke closed his remarks by directly addressing Friedman: "You're right, we did it. We're very sorry. But thanks to you, we won't do it again."

Source: End the Fed, by Rep. Ron Paul, p.110-111 Sep 29, 2010

Milton Friedman: Money supply needs to expand, to support economic growth

What did Milton Friedman believe about money? He was a free-market economist who called himself a libertarian and contributed tremendously to an understanding of how the free market works. There was, however, strong disagreement between Milton Friedman and the hard-money camp of the Austrian school. Friedman believed that the money supply needed to expand in order to support economic growth. He despaired, from time to time, of the Fed's incentive to do what was right, but he believed in the old monetarist principle that the money supply needed to expand by some amount.
Source: End the Fed, by Rep. Ron Paul, p.112 Sep 29, 2010

Ron Paul: Fed has ominous power with no oversight & no control

In 1980, I expressed my concern to Fed Chairman Volcker that reserve requirements could be lowered to zero and the Federal Reserve could buy any asset, including foreign debt.

Volcker assured me he would never lower reserve requirements to that degree or buy up worthless assets; just the authority to have free rein in raising reserve requirements at will. I said that, although I didn't expect that he would use these extreme powers, who knew if in the future we might just have someone who would. The future is now here.

The fact is that not only has this come to pass with Bernanke, but a great deal more authority has been usurped by Fed, while Congress says little about it. The Fed today has ominous powers that Congress barely understands. There is essentially no oversight, no audit, and no control. And the Federal Reserve chairman has no obligations to answer questions. Trillions of dollars can be created and injected into the economy with no obligation by the Fed to reveal who benefits.

Source: End the Fed, by Rep. Ron Paul, p. 48-50 Sep 29, 2010

Ron Paul: Paper money in unconstitutional; only gold is legal tender

The authors of the Constitution were very much aware of the dangers of inflation and the need for commodity money.

The Constitution is clear about no paper money. Only gold and silver were to be legal tender. Since the states caused themselves harm whe they issued their own paper money, the states were prohibited as well from issuing paper currency in Article I, Section 10. So there you have it, plain and simple: paper money is unconstitutional, period.

The Constitution is silent on the issue of a central bank, but the Tenth Amendment is quite clear: if a power is not "delegated to the United States," it doesn't exist. There is no mention whatsoever of a central bank being authorized. Even is a central bank were permissible, it could not legally repeal the legal tender mandate for gold and silver coins.

Because of the runaway inflation of the continental dollar in the 1780s and the Founders' disdain for paper, no paper money was officially issued by the US government until the Civil War.

Source: End the Fed, by Rep. Ron Paul, p.165-166 Sep 29, 2010

Tim Geithner: 2008 errors: money supply too loose; interest rates too low

Focusing on the housing market alone [as the cause of the 2008 recession] was just the last in a parade of claims about the root problem. There are other sectors that have suffered, in finance, car manufacturing, services, retails, and stocks. These are all merely symptoms of a deeper problem: the Fed and its role in sustaining an unsustainable paper-money system.

As current Treasury secretary Timothy Geithner said: "I would say there were three types of broad errors of policy, and policy both here & around the world. One was that monetary policy around the world was too loose too long. And that created this just huge boom in asset prices, money chasing risk. People trying to get a higher return. That was just overwhelmingly powerful."

The host asked specifically: "It was too easy?"

Mr. Geithner went on: "It was too easy, yes. In some ways less so here in the United States, but it was true globally. Real interest rates were low for a very long period of time.

Source: End the Fed, by Rep. Ron Paul, p.124 Sep 29, 2010

Barack Obama: Some wealth of the last economic boom was illusory

The Fed has one power that is unique to it alone: it enables the creation of money out of thin air. We are talking about an awesome power. It is the power to weave illusions that appear real as long as they last. That is the very core of the Fed's power.

As Pres. Obama said of the economic boom that went bust: "I think it's important to understand that some of that wealth was illusory in the first place."

Exactly. But let's also understand the source of the illusion and what to do about it. Of course not everyone is instinctively against this illusion-weaving power, and many even welcome it. They just want to get back to the times when "everything was good" even though it was all just a mirage--a creation of the appearance of wealth by the Fed.

Tragically, the innocent who understand little about the complexity of the monetary system suffer the most, while those who are in the know reap great profit whether the market is going up or down.

Source: End the Fed, by Rep. Ron Paul, p. 2-3 Sep 16, 2009

Richard Nixon: 1971: "We are all Keynesians now"; end the gold standard

On Aug. 15, 1971, Richard "We are all Keynesians now" Nixon announced the US government would default on its pledge to deliver gold to any foreign government holding US dollars at the rate of one ounce of gold for each $35.

In addition, wage and price controls were put in place, along with a 10% import tariff. Instead of the markets collapsing, the move was immediately praised by the Chamber of Commerce, and the stock market soared.

This was the third broken promise by our government regarding gold backing to our dollar. Lincoln did it in the Civil War, and FDR did it in 1933 when he confiscated gold from the American people and made it illegal for American citizens to own gold.

In 1971, the shift to a new monetary regime was an unprecedented experiment in global monetary planning, a wholesale plunge into the world of paper currency. With no backing for the dollar at all, Americans became completely reliant on the Federal Reserve to manage our money and to do so without any outside discipline

Source: End the Fed, by Rep. Ron Paul, p. 44-45 Sep 16, 2009

Ron Paul: Economic crisis demonstrates that Fed must come to an end

The Fed has one power that is unique to it alone: it enables the creation of money out of thin air. Sometimes it makes vast new amounts. Sometimes it makes lesser amounts. The money takes a variety of forms and enters the system in various ways. And the Fed does this through techniques such as open-market operations, changing reserve ratios, and manipulating interest rates, operations that all result in money creation.

We are talking about an awesome power. It is the power to weave illusions that appear real as long as they last. That is the very core of the Fed's power.

Of course not everyone is instinctively against this illusion-weaving power, and many even welcome it. Tragically, the innocent who understand little about the complexity of the monetary system suffer the most, while those who are in the know reap great profit whether the market is going up or down.

Source: End the Fed, by Rep. Ron Paul, p. 2-3 Sep 16, 2009

Ron Paul: Security or growth: you can't have both

As bank customers, we tend to believe that we can have both perfect security for our money, drawing on it whenever we want and never expecting it not to be there, while still earning a regular rate of return. In a true free market, however, there tends to be a tradeoff: you can enjoy a money warehouse or you can hope for a return on your investment. You can't usually have both. The Fed, however, by backing up this fractional-reserve system with a promise of endless bailouts and money creation, attempts to keep the illusion going.

Even with a government guarantee, the system is always vulnerable to collapse at the right moments, namely, when all depositors come asking for their money. Banking legislation can be seen as an elaborate attempt to patch th holes in this leaking boat. Thus have we created deposit insurance, established the "too big to fail" doctrine, created schemes for emergency injections, and all the rest, so as to keep afloat a system that is inherently unstable.

Source: End the Fed, by Rep. Ron Paul, p. 17-18 Sep 16, 2009

Ronald Reagan: No great nation abandoned gold standard and remained great

With President Reagan the subject of the gold standard came up. "Ron," the President told me, "no great nation that abandoned the gold standard has remained a great nation." He indeed was sympathetic, as he was to many libertarian constitutional ideas, but he was also swayed by staff pressure to be pragmatic on most issues.
Source: End the Fed, by Rep. Ron Paul, p. 74 Sep 16, 2009

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