End the Fed: A Review
Rep. Ron Paul’s End the Fed is a bestseller for good reason. It exposes one of the core instruments of corruption, illegitimacy, and theft employed by special interests and the members of Congress, and the Federal Reserve System. One of the main reasons for the current economic depression in the United States is that the U.S Federal government, in open conspiracy with the Federal Reserve, creates debt and prints money to cover that debt. This is a ponzi scheme as corrupt as Bernard Madoff’s investment scheme that bankrupted many well-meaning investors, but in this case the money scheme is a little understood method of redistributing wealth and savings from the middle class to those who print the money and create the debt to cover special interest legislation. This system is a form of outright theft and is immoral, it is unconstitutional, and yet it is legal because immoral laws make it so.
This system needs to come to an end if the remaining freedoms are to be kept and freedoms the Founders intended are to be restored. Ron Paul deserves credit for speaking out and founding the Campaign for Liberty movement to educate Americans about the corruption in which the Federal Reserve is at the center. Paul clearly explains sound financial principles and the nature of money through examples from his childhood and the failures of other countries, like the Weimar Republic. Paul calls the many political justifications and economic theories that promote this ponzi scheme, notably Keynesian economics, lies foisted on an innocent, ignorant or complicit people.
While I can agree 100% with Paul’s exposition of the immorality of the Federal Reserve and the need to “end the fed,” I cannot fully accept his recommendations to return to a gold standard. He does not convince me that pegging the economy to this single commodity provides an adequate monetary basis for sound economic growth. Further, Ron Paul’s economic views are largely obtained from the libertarian wing of the Austrian school of economics and nearly all of his sources come from the Mises Institute. This provides him with a rather dogmatic libertarian view that fails to see a genuine role for the government in protecting the free market.
The end result of this libertarian view is economic anarchy in which large companies could consolidate and gain monopoly power. Such anarchy is an economic “state of nature” analogous to the violent “state of nature” so feared by Hobbes. The role of government is to provide secure ordered liberty by protecting life, liberty, and property. However, the next step on the road to freedom is to provide a secure ordered market that can protect individual investments in their own businesses and allow equal access to markets and prevent protectionist legislation that gives tax breaks or other advantages to companies with superior lobby power. This is why Pfizer and other corporate giants promote a libertarian economic theory rather than a truly free competitive market. However, Hayek’s view of government “planning for competition” makes government a referee that provides a level playing field on which small businesses and average citizens can compete.
Despite the shortcomings I see in Ron Paul’s final economic goals, many of the steps Paul suggests to get out of the current situation are very constructive. One suggestion he makes is to “deny authority to the fed to monetize debt.” I am not sure that I would go so far as to deny a central bank authority to monetize debt related to private construction projects that might add wealth to the economy, but a law that forbid the Fed from monetizing government debt would be one of the most important steps that could be made toward bringing the government ponzi scheme to an end.
Governments should be forbidden to borrow money for governments by nature cannot create wealth, they can only redistribute it. Printing money to pay to cover government debt leads to inflation, and as Ron Paul explains well, it redistributes wealth from the average citizen to wealth elites. Secondly, a point that he does not discuss, is that investors in government bonds and debt gain interest at taxpayer expense. This allows the wealthy a guaranteed income on money without generating any wealth for the economy. It is a form of elite parasitism on the taxpayer that requires government borrowing.
Ron Paul is also correct in calling for an end to “government business partnerships.” There has always been a temptation to such collusion. In my book, Life, Liberty, and the Pursuit of Happiness, Version 4.0, I explained the historical development of this collusion in the United States, and recommended a principle of separation of government and commerce similar to the principle of separation of church and state. The confluence of money and power is as dangerous as the confluence of “truth” and power. Putting checks and balances in place that would eliminate conflicts of interest between money and legal power is one of the most important strategies to combat government corruption. Ending the Fed would end one of the worst conflicts of interest between power and money that has ever existed.
How does this happen? Why do people (politicians of all stripes) when they get into office suddenly lose their ability to process information wisely and make sound decisions? To your point, they are willing to sell cash producing assets one time to meet this years payment…but what happens next year when the payment is due again?