Ron Paul wants to abolish the Federal Reserve. He may be right: It is hard to see how the Fed has enhanced our economy.
Since 1971, when President Nixon ended the gold standard, the dollar's value has been more volatile than in any previous period, not only in immediate, day-to-day volatility, but also over the long run. People often marvel that a loaf of bread used to cost a dime, but they never ask why so much inflation has occurred over these past few decades.
There are several reasons, but the biggest is undoubtedly the Fed. By devaluing the dollar, like China is doing to the yuan, the Fed and its technocrats try to encourage our exports. But as we know, the market will not permit distortions, and will punish them: This is bad policy.
Quantitative easing, author Louis Lehrman says, is just "a euphemism for money printing or credit creation." These excess dollars go abroad as reserves, and are then invested in U.S. securities to finance the deficit. So, we receive back what we give out: We buy without paying. If economic growth were this easy, why stop printing money?
The Fed creates demand for goods and assets without increasing supply. This is a recipe for crippling inflation; it is an insult to hard-working Americans who want to pass down their wealth to their children and not see it turn to worthless paper.
Thus has the Fed has not only fed our consumer culture by financing the national debt, and discouraging savings by weakening the dollar, but it has also masked the problem of vanishing American exports, making the situation look better than it really is. How ironic that this veneer of health is actually helping foreign imports!
One of the many causes of the Great Recession, from which we are now still struggling to escape, is the seemingly endless Federal Reserve subsidies (that's what they are) to the world banking system.
Not only did the Fed help cause the recession, but it has slowed the recovery. By keeping interest rates low, they have hurt savers and pension funds, when our nation needs above all more savings. Who wants to save a thousand dollars annually only to receive 25 basis points or $25 a year from their bank?
There is a certain irony that the financial recession was caused by overextended lending in the real-estate sector and the Fed's solution is to reduce interest rates in that sector of the market. Does the Fed, truly, want to encourage Americans to borrow more money to invest in real estate? Our money supply has about tripled. Is this not an inflation nightmare waiting to happen?
Ron Paul of Texas deserves credit (if you pardon the pun) for raising the question of monetary policy among the general electorate. We must examine the wisdom of its independence from congressional oversight. A more moderate view, one we should all be able to agree on, is that the Federal Reserve must be subject to a public audit of its activities. Surely no one on either side of the aisle thinks it wise to put so much power in the hands of so few without any check or balance.
Steve Forbes, investing and business genius, says that it is almost inevitable that the United States return to the gold standard, which would completely take away the power of the Fed to manipulate the market and manipulate our lives. Another irony is that it is our friends on the left who fear this change and wish to preserve the status quo, afraid of the consequences of restoring convertibility to gold simply because we haven't done it before.
By taking away the power of the Fed and giving it to the free market, we will all benefit. The market, not even the brightest and best-connected of our technocrats, knows best how to allocate resources.
Mr. Paul is 76, and if John McCain was too old to be president, then so is he. But he has already accomplished a tremendous legacy of energizing young people about liberty, and awakening us all to the quiet power of unelected men and women who tinker with our lives. He will be a symbol for years to come.
• Armstrong Williams, author of the 2010 book, "Reawakening Virtues," is on Sirius Power 128, 7 to 8 p.m. and 4 to 5 a.m., Monday through Friday. Become a fan on Facebook at www.facebook.com/arightside, and follow him on Twitter at www.twitter.com/arightside. Read his content on RightSideWire.com.