Since becoming chairwoman of the Federal Reserve, Janet Yellen has promised more of the same. This is not good news: more artificially low interest rates, more propping up of the stock market, more inflation of the money supply, more bailing out big banks, more propaganda for the central bank.
What does this all mean?
Artificial Booms Followed by Depressions: The Dangers of Keeping Interest Rates Low
In his General Theory, John Maynard Keynes advocated near-zero interest rates, but as Henry Hazlitt pointed out, this is an extremely dangerous policy. Indeed, it illustrates the basic problem of the Fed.
As Ludwig von Mises showed, when a central bank pushes interest rates below their market level, let alone to this extreme extent, it brings on the business cycle, that horror of artificial booms followed by depressions.
Such rates lead entrepreneurs to make bad investment decisions. Artificially low rates make it seem as if there are sufficient savings to make the new projects profitable. When the inevitable bust comes, and clarity returns, these projects have to be abandoned or sold at a loss.
The Real State of the Economy
By the way, we’re not supposed to say depression, just as people were earlier told not to say crash or panic — but by historical standards, we are in a depression. The real unemployment rate, which includes short-term discouraged and marginally attached workers, as well as those forced to work part-time, is much higher than the 6.5 percent figure Yellen mentions. John Williams of Shadow Government Statistics places it at greater than 24 percent.
Note: Bill Clinton changed the way the unemployment rate is calculated by subtracting “discouraged” workers. This not only makes no sense — except to fibbing politicians — it is insulting to the people who have been out of work the longest, thanks to the Fed’s monetary manipulations. There are other distortions in this statistic as well, to reduce it in a phony way.
The Dubious Origins and M.O. of the Federal Reserve
The Fed was schemed by big bankers, a Rockefeller senator and a Harvard professor in a secret meeting at the Jekyll Island Club in Georgia, where J. P. Morgan was a member. If you think they might have had the good of the average Joe in mind, I’d have to burst your bubble.
The Fed as a result has wreaked unbelievable damage on our economy, blighted many millions of lives, and made possible such horrors as aggressive wars and the Orwellian state. No need to raise taxes to murder the Iranians, for example. The Fed will print up the dough.
It is long past time that we have sound money and banking, for the sake of prosperity and our future. There is another huge crisis on the horizon, far worse than 2008.
And what can Yellen mean when she praises rising housing prices? She wants to replicate Alan Greenspan’s disastrous boom, when in fact we are benefited by the gently falling prices and more valuable dollar of a non-inflationary gold standard, where everything becomes more affordable, as it would without a central bank. That way everyone benefits.
Instead, we have the Fed, a giant corporatist, counterfeiting machine. It is the sort of combination of state and big business that characterizes fascism and the progressive era that gave birth to it. It is not compatible with the free society.
Anything that restrains the Fed would be a help, so we should always push for reform of the system, and education in its real nature. But nothing will finally help the people of America and the world, and diminish the power of the bad guys, except the end of the central bank.
Ron Paul is a former 12-term Congressman from Texas, three-time presidential candidate and current host of www.ronpaulchannel.com.
Photo credit: exploringmarkets via Flickr Creative Commons