Ron Paul Liberty Report
  • Home
  • Archives
  • About

The Crack-Up is Coming

12/8/2020

 
Picture
By Ron Paul

Some Federal Reserve officials are calling for tougher banking regulations in order to prevent the Fed’s low interest rate policy from leading investors to take “excessive” risks that will create asset bubbles. The Fed is understandably worried that these bubbles will burst leading to another market meltdown. However, the boom-and-bust cycle will not end because regulators stop investors from taking “excessive” risks. Almost every bubble and economic downturn America has experienced over the past 107 years was caused by the Federal Reserve’s manipulation of the money supply.

The Federal Reserve’s actions artificially lower interest rates, thus distorting the signals sent by the rates, which are the price of money. Artificially low interest rates cause investments to be made in projects that are not supported by the real underlying market conditions. This results in a boom, inevitably followed by a crash, then by a new round of money creation and government bailouts restarting the cycle.

Increased regulations will not just fail to head off the next crash, they will make the next recession worse. Federal regulators are not capable of determining what is “excessive” risk. Instead, that determination is best left to market participants. Regulators are subject to having the same Fed-induced distorted view of the marketplace as nearly everyone else. Thus, regulators may mistake a growing asset bubble as a thriving sector of the economy that will serve as a long-term source of growth. This is especially the case if, as with the housing bubble, government policies such as the Community Reinvestment Act encourage the malinvestments. Also, regulators may impede the growth of businesses that are actually responding to real economic conditions instead of Fed-created illusions.

Support among the people, if not among the financial and political elites, for auditing and even ending the Fed, as well as for cryptocurrencies and precious metals, suggests we may soon reach what Ludwig von Mises referred to as the “crack-up.” The crack-up occurs when enough people realize that continuous expanding of the money supply, and the accompanying decline in a currency’s purchasing power, is a feature of central banking. Therefore, they spend their money as soon as they get it, accelerating the rise of hyperinflation.

Concerns over the effects of the US government’s debt, the precarious American economic condition, and growing resentment of US foreign policy have led to a decline in the dollar’s international value. Eventually, these factors will lead to a rejection of the dollar’s world reserve currency status.

Rejection of the dollar’s reserve currency status abroad and the crack-up at home will cause an economic meltdown worse than the Great Depression. Among the problems this will lead to is increased violence as some Americans who believe they are entitled to live off the stolen property of others cut out the government middleman and start stealing from their fellow citizens.

The only way to avoid this fate is to spread the ideas of liberty among the people. A strong liberty movement that can pressure politicians to cut spending, audit and end the Fed, legalize competing currencies, and stop promoting divisive identity politics is the key to peacefully transitioning away from the Keynesian welfare-warfare state to a free society.   ​

Comments are closed.

    RSS Feed

    Archives

    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015



  • Home
  • Archives
  • About