The World Shorts the Dollar

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A
remarkable confluence of recent events has brought unprecedented
but very welcome attention to both U.S. monetary policy and the
global political economy in general.

First, Federal
Reserve Board Chairman Ben Bernanke recently announced that the
Fed would embark upon another round of monetary easing by purchasing
$600 billion worth of U.S. Treasury debt. This amounts to an admission
that markets have run out of patience with our profligacy, and therefore
our own central bank literally must serve as the buyer of last resort
for Treasury debt.

Second, World
Bank president Robert Zoellick openly suggested that gold could
play a helpful role in the global monetary system by serving as
reference against more volatile fiat currencies. This is almost
heresy coming from a neoconservative globalist like Mr. Zoellick.
It hints at an obvious but unspoken truth that is anathema to politicians
and central bankers alike: namely, that gold could be viewed as….
money!

Finally, Mr.
Obama attended the G20 summit in South Korea last week and found
a very chilly reception for his vision of American economic policy.
Mr. Obama argued for continued worldwide stimulus, via continued
debasing of the U.S. dollar, to bolster American exports. Several
powerful European and Asian finance ministers, however, rejected
this approach out of hand as nothing short of a currency war. They
are committed to austerity measures at home, and don’t want
to let the U.S. simply monetize its past sins at their expense.

All of these
events culminated in a tremendous amount of political and media
scrutiny aimed the Fed. Ordinary Americans are demanding answers
and accountability, and they are putting heat on their political
representatives in Washington to end the cozy “independence”
from congressional oversight the Fed has enjoyed for so long.

In the 35 years
I have been studying, speaking, and writing about monetary policy
I have never before seen Congress or the financial press pay much
attention to the Fed. Monetary policy has always been considered
boring on Capitol Hill, something left to remote policy wonks far
away from the din of presidential or congressional politics. Congress
always has been eager to leave Fed governors well alone, with no
oversight or accountability, as long as they played along and papered
over the growing budget deficits.

But it’s
amazing what a global economic meltdown will do to the political
and media landscape. In just two short years, the Fed has become
the hot topic and a lightning rod for criticism. While it is gratifying
to see so many formerly uninterested politicians, economists, talk
show hosts, and pundits suddenly rally to attack the Fed, one can
only wonder whether they truly understand that central banking is
inherently incompatible with our Constitution and a free market
economy.

In other words,
it’s not enough to show outrage at the latest Fed action or
argue about the relative merits of Mr. Bernanke compared to his
predecessors. To reclaim our dollar and our economy, Americans must
oppose central banking per se. Fiat currencies cannot be
“reformed” or “managed.” They are fundamentally
subject to ruinous debasement courtesy of the political and economic
ruling class. History shows that this is true in all nations at
all times.

See
the Ron Paul File

November
17, 2010

Dr. Ron
Paul is a Republican member of Congress from Texas.

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