Ron Paul: "What Has QE Wrought?"

The Fed has followed a deliberate policy of monetary debasement from the time it was sanctioned in 1913. Though there was a steady erosion of the dollar’s value throughout the 20th Century, a link to gold was maintained until the closing of the gold window by Nixon in 1971. A total fiat currency - the dollar - was unleashed on the world with this event, and the US became the biggest beneficiary by assuming the role of managing the world reserve currency. For decades this well served America’s interests since it was equivalent to the world permitting us to create as much “gold” as we wanted. The system was totally fraudulent since it was imaginary money and we owned the printing press. Why should anyone be surprised at the results of what excessive money creation has caused? Printing fiat currency and expanding the money supply has nothing to do with creating wealth. This process is more likely to destroy wealth than create it. The QE programs have undermined sound economic policy and will continue to do so as the consequences of the massive monetary expansion become more evident with the bursting of the bubble economy.

Instead of allowing the correction to run its course, the economic planners continue to pursue the goal of invigorating a failed experiment. Keynesianism created the monster crisis that we’re facing and yet the platitudes pushed by both political parties fail to address the subject of huge deficits and massive spending. This process can’t be stopped as long as the politicians and the special interests persistently and strongly oppose restricting the current role of our government. A compliant citizenry that fails to grasp the importance of liberty and instead accepts dependency on government as a substitute for self-reliance, guarantees that the bursting of the QE Bubble will generate a much more serious crisis than it need be.

What’s involved in the bubble? Plenty! Almost everything to some degree. It is difficult for an economy to operate smoothly without a sound currency to measure value when goods and services are transferred from one entity to another. A definable medium of exchange is crucial to facilitate the market. Ever since direct bartering was phased-out more than three thousand years ago, the choice of the marketplace for money has been something tangible. As the understanding of the nature of money developed, the items used for money were easily recognizable, devisable, long lasting, and definable. Early on, governments challenged the market choices, especially when gold and silver were chosen, and replaced them with a government monopoly control over the currency. The contest between the market’s desire for honest money and the government’s desire to solidify power by usurping the authority to debase the currency started early on and continues to this day.


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