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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

Energia alternativa e segura…

Porque vale a pena desmistificar alguns tipos de energia…

Um olhar sobre o LTRO

Categorias:Ligações Directas, Videoteca Etiquetas:

Não há duas sem três

Fevereiro 25, 2012 Deixe um comentário
Categorias:Ligações Directas Etiquetas:,

Inovadora forma de combate ao desemprego

Fevereiro 22, 2012 Deixe um comentário

Nada como passar a obrigar os trabalhadores a pagarem para trabalhar para o desemprego acabar…

Até quando os gregos continuarão a ceder à chantagem?

 

Leituras essenciais (2)

Fevereiro 22, 2012 Deixe um comentário

Henrique Raposo de volta após interregno… só foi pena o artigo de 2ª feira… deu azar pah! 🙂

Certos alemães também têm uma troika.

Convém perceber que, tal como os EUA, a Alemanha é um bicho complexo, com diferentes tons e camadas. Para começo de conversa, estamos perante uma federação. Isto quer dizer o quê? Quer dizer que existe tensão entre os diversos estados da Alemanha. E, não por acaso, esta tensão interna lança uma nova luz sobre a política externa do gigante. Um exemplo: diversos estados da Alemanha, liderados pela Baviera, forçaram a cidade de Berlim a assinar uma espécie de memorando da troika interno. Ou seja, antes de aplicar a troika ao exterior, a Alemanha aplicou a troika a si própria. Berlim cometeu os mesmos pecados dos países do sul da Europa: acumulou uma dívida tremenda, mas não tem capacidade para a pagar. Os responsáveis berlinenses justificam a dívida com obras que transformaram a cidade numa coisa sexy. Resposta do ministro das finanças da Baviera? “Pois, Berlim é sexy, mas somos nós que pagamos”. Percebe-se muito bem a irritação dos bávaros: a dívida da região de Munique é de apenas 2.600 por habitante, enquanto que a dívida de Berlim está na casa dos 18.000 euros por habitante. Berlim é, portanto, a Grécia interna da Alemanha.