Ron Paul: “Central Bankers Are Intellectually Bankrupt”

Ron Paul: “Central Bankers Are Intellectually Bankrupt”.

The financial crisis has fully exposed the intellectual bankruptcy of the world’s central bankers.

Why? Central bankers neglect the fact that interest rates are prices. Manipulating those prices through credit expansion or contraction has real and deleterious effects on the economy. Yet while socialism and centralised economic planning have largely been rejected by free-market economists, the myth persists that central banks are a necessary component of market economies.

These economists understand that having wages or commodity prices established by government fiat would cause shortages, misallocations of capital and hardship. Yet they accept at face value the notion that central banks must determine not only the supply of one particular commodity – money – but also the cost of that commodity via the setting of interest rates.

Printing unlimited amounts of money does not lead to unlimited prosperity. This is readily apparent from observing the Fed’s monetary policy over the past two decades. It has pumped trillions of dollars into the economy, providing money to banks with the hope that this new money will spur lending and, in turn, consumption. These interventions are intended to raise stock prices, lower borrowing costs for companies and individuals, and maintain high housing prices.

But like their predecessors in the 1930s, today’s Fed governors behave as if the height of the credit bubble is the status quo to which we need to return. This confuses money with wealth, and reflects the idea that prosperity stems from high asset prices and large amounts of money and credit.

The push for easy money is not new. Central banking was supposed to have ended the types of periodic financial crises the US experienced throughout the 19th century. Yet US financial panics have only got worse since the centralisation of monetary policy via the creation of the Fed in 1913. The Depression in the 1930s; the haemorrhaging of gold reserves during the 1960s; the stagflation of the 1970s; the dotcom bubble of the early 2000s; and the current recession all have their root in the Fed’s loose monetary policy.

Each of these crises began with an inflationary monetary policy that led to bubbles, and the solution to the busts that inevitably followed has always been to reflate the bubble.

This only sows the seeds for the next crisis. Lowering interest rates in an attempt to forestall a recession in the aftermath of the dotcom bubble required massive credit creation that led to the housing bubble, the collapse of which we still have not recovered from today. Failing to learn the lesson of the bursting of both the dotcom bubble and the housing bubble, the Fed has pumped trillions of dollars into the economy and has promised to leave interest rates at zero through to at least 2014. This will only ensure that the next crisis will be even more destructive than the current one.

Not content with its failed attempts to prop up the US economy, the Fed has set its sights on bailing out Europe, too. Through currency swaps, it has committed to offering potentially hundreds of billions of US dollars to the European Central Bank and we cannot rule out the possibility of direct intervention.

The Fed’s response to the crisis suggests that it believes the current crisis is a problem of liquidity. In fact it is a problem of poorly allocated investments caused by improper pricing of money and credit, pricing which is distorted by the Fed’s inflationary actions.

The Fed has made banks and corporations dependent on cheap money. Instead of looking for opportunities to invest in real products that will serve the needs of consumers, Wall Street awaits the minutes of each Federal Open Market Committee meeting with bated breath, hoping that QE3 and QE4 are just around the corner. It is no wonder that long-term investment and business planning are stagnant.

We live in a world that seems to have abandoned the concept of savings and investment as the source of real wealth and economic growth. Financial markets clamour for more cheap money creation on the part of central banks. Hopes of further quantitative easing from the Fed, the Bank of England, or the Bank of Japan – or further longer-term refinancing operations from the ECB – buoy markets, while decisions not to intervene can cause stocks to plummet. Policy makers focus on spurring consumption, while ignoring production. The so-called capitalists have forgotten that capital cannot be created by government fiat.

Control of the world’s economy has been placed in the hands of a banking cartel, which holds great danger for all of us. True prosperity requires sound money, increased productivity, and increased savings and investment. The world is awash in US dollars, and a currency crisis involving the world’s reserve currency would be an unprecedented catastrophe. No amount of monetary expansion can solve our current financial problems, but it can make those problems much worse.

Um grande texto que demonstra bem o papel dos bancos centrais nas actuais crises financeiras…

Anúncios

Descubra as diferenças: Governo vs Cidadão Comum

Saúde: Obama vs Obama

Categorias:Opinião, Saúde, Videoteca Etiquetas:,

Energia alternativa e segura…

Porque vale a pena desmistificar alguns tipos de energia…

Um olhar sobre o LTRO

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Demagogia Socialista vs Mercados do Futebol – O caso francês

Numa altura em que Sarkozy afirma que Sócrates está a mais em Paris, e em que o socialista Hollande se mostra cada vez mais “perigoso” para a recandidatura de Sarkozy, nada como deixar a demagogia socialista atingir níveis estratosféricos para começar a dar tiros nos pés.

Socialist Party candidate François Hollande, frontrunner in the French presidential election, was trying to score some cheap points against President Nicolas Sarkozy—who’d been criticized for his cozy relationship with the rich. “I don’t like the rich,” he said—and followed up on February 27 on TF1, a French TV network, when he trotted out some ideas, such as the perennial favorite of capping gasoline prices. But most intriguingly, he offered his raptly listening compatriots two new income-tax brackets: 45% on income over €150,000 ($195,000) and 75% on income over €1,000,000.

“The considerable increases in remuneration of the bosses of the CAC 40—” he said about the CEOs of the largest publicly traded companies in France “—two million euros per year on average, how can we accept that?” And he went on very sensibly: “What I appreciate is talent, work, and merit, as those enable France to move forward,” he said. “What I do not accept are indecent wealth and remuneration….”

Published figures on how many taxpayers would be impacted are not available. Estimates are in the 15,000 to 20,000 range, perhaps up to €250 million in additional tax revenues. Even if small, it’s “a message of social cohesion,” he said, and not just that, but it’s also a sign of “patriotism to accept to pay additional taxes to put the country back on its feet.”

France does need to get back on its feet. Unemployment is rising. New vehicle sales are plunging, and French automakers—members of the CAC40—are threatening with layoffs, the bane of any socialist. And it’s just the beginning.

The “Hollande Tax,” as it was lovingly dubbed, was aimed at corporate compensation schemes. While CEOs broke into a cold sweat as they pressed their iPhones to their ears to better hear the whispered strategies of their offshore bankers, a hullabaloo broke out in a totally unexpected area: le foot … soccer, France’s national sport.

“Our best players, who are in a global market, will leave,” lamented Frédéric Thiriez, president of the Professional Football League. Players chimed in. Christophe Jallet, defender at the Paris Saint-Germain, one of the most prestigious soccer clubs in France called it “working for nothing.” Sports Minister David Douillet said that the measure would destroy professional soccer in France, that the industry would lose money, and that €600 million in tax revenues derived from it would disappear. Hundreds of millions more would be lost from publicly financed stadiums that would no longer attract large crowds. The top players would continue to earn many millions per year, but somewhere else. And French soccer clubs would die.

It hit home. Soccer is the sport of the people. Even the poor and the perennial underclass of North African descent and the otherwise discriminated-against proletariat, and even François Hollande himself, they all love soccer, and they all want France to win the World Cup in Brazil in 2014. But France won’t even be able to qualify without professional players.

Oh-là-là.

Wednesday morning, a little over a week after he’d trotted out his proposal, Hollande began to backpedal. On Europe 1, France’s largest radio network, Hollande said defensively, “We must find smoothing mechanisms for the income tax,” so that peaks, such as lump-sum payments, can be spread out over time and don’t fall into that bracket.

Also on Wednesday, former Prime Minister and fellow socialist Laurent Fabius came out to defend Hollande and at the same time whittle away at the Hollande Tax. “We are in an exceptional period, and it’s legitimate that those who are lucky enough to earn a lot of money pay an exceptional tax,” he said on RMC radio. “Afterwards, we can discuss different modalities.”Afterwards, because suddenly, it’s only going to be temporary.

The people have spoken. If it’s going to hurt soccer, the Hollande Tax is dead. And so the backpedalling process has started. But he has other problems. He dared to speak out against the austerity policies that German Chancellor Angela Merkel is imposing on the Eurozone. He wants stimulus and state-funded mega-projects instead. And he wants to renegotiate Merkel’s fiscal union pact that 25 EU member states already signed. But now word leaked out that Merkel roped in three powerful allies and lined them up against him—to keep Sarkozy in power.

Não há duas sem três

Fevereiro 25, 2012 Deixe um comentário
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