Federal Reserve is the Culprit (Ron Paul)

Statement of Congressman Ron Paul
United States House of Representatives

Federal Reserve is the Culprit

February 25, 2009
(Watch here)

Mr. Speaker, the Federal Reserve is the culprit; it has delivered this crisis to us. The Federal Reserve's low interest rate policy is a big mistake; it is not a panacea.

Artificially low interest rates are achieved by inflating the money supply. Low interest rates penalize the thrifty, and those who save are cheated. It promotes consumption and borrowing over savings and investing. Manipulating interest rates is an immoral act, it is economically destructive. The policy of artificially low interest rates caused our problems and, therefore, cannot be the solution.

The market rate of interest is crucial information for the smooth operation of the economy. A central bank setting interest rates is price fixing and is a form of central economic planning. Price fixing is a tool of socialists and destroys production.

Central bankers, politicians and bureaucrats can't know what the proper rate should be. They lack the knowledge and are deceived by their aggrandizement. Manipulating the money supply and interest rates rejects all the principles of the free market.

Ironically, free markets and sound money generates low rates, but unlike the artificially low rates orchestrated by the Fed, the information conveyed is beneficial to investors and savers.

The Congress, by conceding this authority, conveys extraordinary economic powers to the elite few. This is a power that has been abused throughout history. Only the Federal Reserve can inflate the currency, creating new money and credit out of thin area, in secrecy, without oversight or supervision.

Inflation facilitates deficits, needless wars, and excessive welfare spending. Debasing a currency is counterfeiting. It steals value from every dollar earned or saved. It robs the people and makes them poorer. It is the enemy of the working person.

Inflation is the most vicious and regressive of all forms of taxation. It transfers wealth from the middle class to the privileged rich.

The economic chaos that results from a policy of central bank inflation inevitably leads to political instability and violence. It is an ancient tool of all authoritarians.

Inflating is never a benefit to freedom-loving people. It destroys prosperity and feeds the fires of war. It is responsible for recessions and depressions. It is deceptive, addictive, and causes delusions of grandeur with regards to wealth and knowledge.

Wealth cannot be achieved by creating money by fiat. It instead destroys wealth and it rewards the special interests. Depending on monetary fraud for national prosperity or a reversal of our downward spiral is riskier than depending on the lottery.

Inflation has been used to pay for all the wars and empires, and they all end badly. Inflationism and corporatism engenders protectionism and trade wars. It prompts scapegoating; blaming foreigners, illegal immigrants, ethnic minorities, and too often freedom itself for the predictable events and suffering that results. Besides, the whole process is unconstitutional. There is no legal authority to operate such a monetary system. So let's stop it. Let us restore a policy of prosperity, peace and liberty. The time has come. Let's end the Fed.