Ron Paul: "What Has QE Wrought?"
The Federal Reserve has once again created an artificial and unsustainable economic bubble. Central planning still doesn't work, and the sooner we move to sound money the better.
Ron Paul discusses the monumental mess that The Federal Reserve has wrought.
The Great Recession began in 2007. It didn’t take long for the money managers to recognize its severity, and that a little tinkering with interest rates would not suffice in dealing with the economic downturn. In Dec. 2008, the first of four Quantitative Easing programs began which did not end until Dec. 18, 2013. Some very serious consequences of this policy of unprecedented credit creation have set the stage for a major monetary reform of the fiat dollar system. The dollar’s status as the reserve currency of the world will continue to be undermined. This is not a minor matter. As our financial system unravels, the seriousness of it will become evident to all, as the need to pay for our extravagance becomes obvious. This will make the country much poorer, though the elite class that manages such affairs will suffer the least.
By the time the QE’s ended, the Central banks of the world had increased their balance sheet by $8.3 trillion, with only $2.1 trillion worth of GDP growth to show for it. This left $6.2 trillion of excess liquidity in the banking system that did not go where the economic planners had hoped. Central banks now own $9.7 trillion of negative interest yielding bonds. The financial system has been left with a bubble mania, financed by artificial credit and unsustainable debt. The national debt in 2007 was $8.9 trillion; today it’s $20.5 trillion. Rising interest rates will come and that will be deadly for the economy and the Federal budget.
This inflationary policy is generated by the belief that there is no benefit in allowing the needed economic correction to the problems generated by the Fed to occur. The correction is what the market requires, not the resumption and acceleration of the dangerous inflationary policy that caused the bubble economy. It’s like giving a case of beer to an alcoholic to calm his nerves as he attempts to stop drinking. It should not surprise anyone that perpetuating a problem won’t solve the problem.