Ron Paul: Fed Threatens Depression, $100 Bills Worthless

Recently by Ron Paul: The Fed’s Interesting Week

Ron Paul Wants to "End the Fed": Bring Back Sound Monetary Policies Backed by Something More Substantial Than Printing Presses

Don’t Steal, the Government Hates Competition. ~ Plaque on the desk of Rep. Ron Paul

Judging by the plaque on the desk of Ron Paul, R-TX, the so-called (by his detractors) "Doctor No" of the Congress, one would think he hates government. But, as he shows in his latest book, End the Fed (Grand Central Publishing, 224 pages, $21.99) he doesn’t hate government, he just wants it to do what the Constitution says it should do — nothing more and nothing less.

One institution that he thinks is not only unconstitutional, but philosophically, economically and morally wrong is the Federal Reserve System, established in 1913 — the same year as the federal income tax — as a backdoor approach to a central bank. It was developed — like the various czars, Troubled Asset Rescue Program (TARP) and bailouts of car companies and banks — in response to a financial depression, one that occurred in 1907.

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In the post-meltdown world, Paul says it is irresponsible, ineffective, and ultimately useless to have a serious economic debate without considering and challenging the role of the Federal Reserve. Throughout the book — and especially in the last chapter, "The Way Out," Paul shows how the nation functioned just fine without a central bank. The states don’t have central banks and must rely on tax revenue to live within their means, he says. He would like to see a return to the gold standard, but even without this ideal situation we shouldn’t wait for one before we end the Fed. Too, arguments that a central bank would prevent financial panics certainly haven’t come true in the almost 100 years we’ve had the Fed. In his view, the Great Depression was at least partially caused by the actions of the Fed.

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Questioning the Fed is like questioning Mom, apple pie and the American way to most people who are unaware of its genesis at a meeting at Jekyll Island, Georgia in 1910. Most people think of the Fed as an indispensable institution without which the country’s economy could not properly function. But in End the Fed, Ron Paul, a 2008 GOP Presidential contender and the 1988 Libertarian Party Presidential candidate, draws on American history, economics, and fascinating stories from his own long political life to argue that the Fed is both corrupt and unconstitutional. It is inflating currency today at nearly a Weimar Republic (Germany from 1919—1933) or Zimbabwe level, a practice that threatens to put us into an inflationary depression where $100 bills are worthless.

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What most people don’t realize is that the Fed — created by the Morgans and Rockefellers at a private club off the coast of Georgia — is actually working against their own personal interests. Paul’s urgent appeal to all citizens and officials tells us where we went wrong and what we need to do fix America’s economic policy for future generations.

Paul, a physician, is a dedicated follower of the Austrian school of economics — he’s a distinguished counselor to the Ludwig von Mises Institute, keeper of the flame for the Austrian school — and he quotes many of that school’s economists in his arguments against the Fed.

One of them is the late Murray N. Rothbard, who argued in his book History of Money and Banking, that the Fed did not originate as a policy response to national need. It wasn’t erected for any of its stated purposes. It was founded by two groups of elites: government officials and large financial and banking interests. Rothbard adds a third critical element: economists hired to give the scheme a scientific patina.

Opposition to the Fed has come from the Left and the Right. An AlterNet story on the Left quotes a study by Huffington Post’s Ryan Grim makes the same point Rothbard made in his book: That the Fed has dedicated itself to marginalizing economists who question the Fed.

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September 16, 2009