Ron Paul’s Texas Straight Talk: The Neo-Alchemy of the Federal Reserve

As the printing presses for the bailouts run at full speed, those in power are no longer even pretending that the new giveaways will fix our problems.  Now that we are used to rewarding failure with taxpayer-funded bailouts, we are being told that this is “just a start,” more funds will inevitably be needed for more industries, and that things would be much worse had we done nothing.

The updated total bailout commitments add up to over $8 trillion now.  This translates into a monetary base increase of 75 percent over the last two months.  This money does not come from some rainy day fund tucked away in the budget somewhere – it is created from thin air, and devalues every dollar in circulation.  Dumping money on an economy, as they have been doing, is not the same as dumping wealth.  In fact, it has quite the opposite effect.

One key attribute that gives money value is scarcity.  If something that is used as money becomes too plentiful, it loses value.  That is how inflation and hyperinflation happens.  Giving a central bank the power to create fiat money out of thin air creates the tremendous risk of eventual hyperinflation.  Most of the founding fathers did not want a central bank.  Having just experienced the hyperinflation of the Continental dollar, they understood the power and the temptations inherent in that type of system.  It gives one entity far too much power to control and destabilize the economy.

Our central bankers have had a tremendous amount of hubris over the years, believing that they could actually manage a paper money system in such a way as to replicate the behavior and benefits of a gold standard.  In fact, back in 2004 then Fed Chairman Alan Greenspan told me as much.  People talk about toxic assets, but the real toxicity in our economy comes from the neo-alchemy practiced by the Federal Reserve System.   Just as alchemists of the past frequently poisoned themselves with the lead or mercury they were trying to turn to gold, today’s bankers are poisoning the economy with accelerated fiat money creation.  

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