Does The Bell Toll For The Fed?

Last week, Federal Reserve Chair Janet Yellen hinted that the Federal Reserve Board will increase interest rates at the board’s December meeting. The positive jobs report that was released following Yellen’s remarks caused many observers to say that the Federal Reserve’s first interest rate increase in almost a decade is practically inevitable.

However, there are several reasons to doubt that the Fed will increase rates anytime in the near future. One reason is that the official unemployment rate understates unemployment by ignoring the over 94 million Americans who have either withdrawn from the labor force or settled for part-time work. Presumably the Federal Reserve Board has access to the real unemployment numbers and is thus aware that the economy is actually far from full employment.

The decline in the stock market following Friday’s jobs report was attributed to many investors’ fears over the impact of the predicted interest rate increase. Wall Street’s jitters about the effects of a rate increase is another reason to doubt that the Fed will soon increase rates. After all, according to former Federal Reserve official Andrew Huszar, protecting Wall Street was the main goal of “quantitative easing,” so why would the Fed now risk a Christmastime downturn in the stock markets?

Donald Trump made headlines last week by accusing Janet Yellen of keeping interest rates low because she does not want to risk another economic downturn in President Obama’s last year in office. I have many disagreements with Mr. Trump, but I do agree with him that the Federal Reserve’s polices may be influenced by partisan politics.

Janet Yellen would hardly be the first Fed chair to allow politics to influence decision-making. Almost all Fed chairs have felt pressure to “adjust” monetary policy to suit the incumbent administration, and almost all have bowed to the pressure. Economists refer to the Fed’s propensity to tailor monetary policy to suit the needs of incumbent presidents as the “political” business cycle.

Presidents of both parties, and all ideologies, have interfered with the Federal Reserve’s conduct of monetary policy. President Dwight D. Eisenhower actually threatened to force the Fed chair to resign if he did not give in to Ike’s demands for easy money, while then-Federal Reserve Chair Arthur Burns was taped joking about Fed independence with President Richard Nixon.

The failure of the Fed’s policies of massive money creation, corporate bailouts, and quantitative easing to produce economic growth is a sign that the fiat money system’s day of reckoning is near. The only way to prevent the monetary system’s inevitable crash from causing a major economic crisis is the restoration of a free-market monetary policy.

One positive step Congress may take this year is passing the Audit the Fed bill. Fortunately, Senator Rand Paul is using Senate rules to force the Senate to hold a roll-call vote on Audit the Fed. The vote is expected to take place in the next two-to-three weeks. If Audit the Fed passes, the American people can finally learn the full truth about the Fed’s operations. If it fails, the American people will at least know which senators side with them and which ones side with the Federal Reserve.

Allowing a secretive central bank to control monetary policy has resulting in an ever-expanding government, growing income inequality, a series of ever-worsening economic crises, and a steady erosion of the dollar’s purchasing power. Unless this system is changed, America, and the world, will soon experience a major economic crisis. It is time to finally audit, then end, the Fed.

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by

U.S. Economy Deteriorating At An Even Faster Pace

Despite doubling the national debt and the expansion of the money supply to some $8 trillion since the beginning of Obummer’s misbegotten presidency, the U.S. economy is once again in a free fall. Actually, there has been no real recovery, but a continual deterioration of living standards despite the lies and distortions from the financial media and government authorities.

Conditions, however, are now descending at an even faster pace.

Recently, the leading manufacturer of heavy equipment, Caterpillar, announced that job cuts would exceed 10,000 through 2018. Up to 5,000 employees will receive pink slips between now and the end of 2016. Retail sales for the manufacturing giant have slumped 11% between June and August.

While Caterpillar’s contraction is an ominous sign, a more telling indicator of worsening economic conditions came from the Federal Reserve’s refusal to raise interest rates at its latest FOMC meeting. Many commentators had speculated that the Fed would raise rates at least a quarter of one percent on the belief that the economy was strengthening.

The Fed, of course, based its refusal to raise rates on “international concerns” – China’s stock market selloff. The real reason is that the nation’s central bank understands, although it will not publicly admit it, that the economy is far too weak to “absorb” a rate hike, no matter how infinitesimal.

More importantly, the Fed cannot raise rates to any significant degree because the entire financial system, which is built on “cheap money,” would immediately plunge into a significant downturn similar to that of 2008, or worse. The federal government and many of the states and municipalities would default since they could not continue to finance their current profligate borrowing and spending patterns with higher interest rates.

Thus, the Fed is trapped in a world of zero interest rates for the foreseeable future. As economic conditions continue to worsen, the central bank will more than likely turn to another round of money printing like its infamous “QE” program.

While the Fed is locked into a zero interest rate policy, the Obama Administration and Congress remain oblivious to economic reality. A few years back, Obama and the one-time Democratically-controlled Congress tried a “stimulus” program which did nothing but increase the national debt. Also weighing down the economy is the disastrous Obamacare program, which will only become more burdensome as time passes.

Just as troubling, none of the current crop of presidential hopefuls, with one possible exception, has proposed or suggested any credible measure that will improve matters. None of the fundamental problems that are crippling the economy have been seriously addressed.

The reason why there has been no recovery is that the malinvestments and bubbles created during the last boom have not been allowed to contract and/or burst. Instead, the Fed pumped massive amounts of “liquidity” (money printing) into the markets, which kept these institutions (mostly banks) and their assets afloat.

A credit implosion will not come about “voluntarily.” The Fed will not increase interest rates, nor will the Obama Administration or Congress have the courage to cut spending to relieve pressure on the Fed to finance its unsustainable deficits and continue to inflate the stock market.

Instead, there eventually will be a monetary crisis surrounding the dollar, which will force interest rates to rise, which will lead to widespread defaults and bankruptcies and an ensuing depression which will dwarf every previous economic downturn in American history.

Alternative financial analysts have, for some time, pointed to the declining living standards not only in the U.S., but throughout the Western world. Egon von Greyerz of Matterhorn Asset Management has predicted some very unpleasant times in the not too distant future: “The coming years will not be easy. I wrote an article a few years ago called ‘The Dark Ages Are Here’ and I now really think they are imminent. These will be difficult times for most of us.”

Ultimately, the only way the U.S. economy will be turned around is through a change in ideology. The ideas and policies upon which not only the U.S. but the entire Western world’s economies are predicated upon must be debunked. Until the principles and beliefs of the current economic system are intellectually discredited, the U.S. economy will continue to stagnate and eventually collapse.

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by

Who Are The Champions Of The Common Man?

The media’s caricature of libertarians is a pendulum that swings from one extreme to another. One minute we’re grasping plutocrats, championing the privileged, and the next minute we’re losers living in our parents’ basements.

Not long ago, Michael Lind adopted the first of these, professing to find it risible that a libertarian might pose as the champion of the common man. Why, libertarians favor the super rich!

Hence, according to Lind, the idea of “libertarian populism” is absurd. Now I agree with Bob Wenzel that the last thing we need is another term, and that plain old “libertarian” suits us just fine. But it’s worth noting that the idea of libertarian populism – that libertarians are indeed the champions of the ordinary folk, because we are champions of all innocent people against the predatory state – is not ridiculous at all, as the great champion of regular people, Ron Paul, has shown.

Now to be sure, libertarians don’t favor anyone in particular. We don’t single out the poor, the rich, the working class, the industrialists, the conservationists, the farmers, the young, the old, the black, the white, or anyone else for special treatment. We are the champions of everyone against the biggest ripoff of them all.

This was the view of Murray N. Rothbard, Mr. Libertarian himself, who said in 1977:

Too many libertarians have absorbed the negative and elitist conservative worldview to the effect that our enemy today is the poor, who are robbing the rich; the blacks, who are robbing the whites; or the masses, who are robbing heroes and businessmen. In fact, it is the state that is robbing all classes, rich and poor, black and white, worker and businessman alike; it is the state that is ripping us all off; it is the state that is the common enemy of mankind. And who is the state? It is any group who manages to seize control of the state’s coercive machinery of theft and privilege. Of course these ruling groups have differed in composition through history, from kings and nobles to privileged merchants to Communist parties to the Trilateral Commission. But whoever they are, they can only be a small minority of the population, ruling and robbing the rest of us for their power and wealth. And since they are a small minority, the state rulers can only be kept in power by deluding us about the wisdom or necessity of their rule. Hence, it is our major task to oppose and desanctify their entrenched rule, in the same spirit that the first libertarian revolutionaries opposed and desanctified their rulers two hundred years ago. [Emphasis added.]

This is why the Jacksonians (who were, to be sure, far from pure libertarians, but that isn’t the point) in 1830s America adopted “equal rights” as their slogan. We know what “equal rights” means today, of course: expropriation of one group to benefit another, with the state skimming off its usual cut for itself. But in those days, equal rights meant only that no person or group received any state-provided advantage, since state-provided advantages always come at the expense of other people or groups.

This was considered the obvious program for the common man. While the Whigs pined for a national bank and various corporate welfare projects, the Democrats believed themselves to be champions of the workingman’s cause by opposing all forms of state privilege. By and large they did not counter with federal programs of their own.

But hasn’t the state lifted up the poor? The state’s efforts to alleviate poverty have had minuscule effects when they haven’t been counterproductive. The vast bulk of the conquest of poverty that took place in the twentieth century occurred well before the federal government had done much of anything. It occurred because the unhampered market naturally leads to an improvement in the general standard of living.

Meanwhile, as the country at large endures great economic distress, civilian employment has skyrocketed in Washington, DC, where the average federal worker earns more than double the salary of the average worker in the private sector. The parasite-host relationship that exists between the ruling few and the toiling many is rarely so stark.

It’s no coincidence that Murray Rothbard was also a pioneer in power-elite analysis. For instance, Rothbard’s essay “Wall Street, Banks, and American Foreign Policy,” published as a small book by the Center for Libertarian Studies, proposes that there might be a teensy bit more to American foreign policy than a disinterested dedication to promoting “democracy.”

Consider just a few paragraphs:

A glance at foreign policy leaders since World War II will reveal the domination of the banker elite. Truman’s first Secretary of Defense was James V. Forrestal, former president of the investment-banking firm of Dillon, Read & Co., closely allied to the Rockefeller financial group. Forrestal had also been a board member of the Chase Securities Corporation, an affiliate of the Chase National Bank.

Another Truman Defense Secretary was Robert A. Lovett, a partner of the powerful New York investment-banking house of Brown Brothers Harriman. At the same time that he was Secretary of Defense, Lovett continued to be a trustee of the Rockefeller Foundation. Secretary of the Air Force Thomas K. Finletter was a top Wall Street corporate lawyer and member of the board of the CFR while serving in the cabinet. Ambassador to Soviet Russia, Ambassador to Great Britain, and Secretary of Commerce in the Truman Administration was the powerful multi-millionaire W. Averell Harriman, an often underrated but dominant force within the Democratic Party since the days of FDR. Harriman was a partner of Brown Brothers Harriman.

Also Ambassador to Great Britain under Truman was Lewis W. Douglas, brother-in-law of John J. McCloy, a trustee of the Rockefeller Foundation, and a board member of the Council on Foreign Relations. Following Douglas as Ambassador to the Court of St. James was Walter S. Gifford, chairman of the board of AT&T, and member of the board of trustees of the Rockefeller Foundation for almost two decades. Ambassador to NATO under Truman was William H. Draper, Jr., vice-president of Dillon, Read & Co.

That’s just half of Rothbard’s analysis of the power elite surrounding just one president’s foreign policy team. Not exactly a cross-section of the downtrodden, in other words.

(Read Rothbard’s essay in its entirety, by the way, where he discusses some of the less glamorous motivations at work in the making of foreign policy.)

Who has benefited from the American warfare state? Who, that is, apart from those with political connections or government jobs? The question answers itself. Everyone else has suffered from the trillions of dollars looted from them so the Pentagon might have the power to obliterate every conceivable enemy city a dozen times over. We have suffered from increased indebtedness, and – because capital formation is undermined by the squandering of resources in war and in massive diversion of resources to the military sector – lower real wages than we would otherwise have enjoyed. We’ve suffered from the civilian research and development that never occurred because the brains behind it were siphoned into military research. The costs go on and on.

We can repeat this analysis over and over again, as we survey important components of American life. Who suffers under the federal government’s drug war? Not the wealthy and powerful. And who benefits? Certainly not the poor. But the tax-funded police forces that are awarded with more powerful weapons, more authority, and a seemingly endless cash cow, seem to do rather well.

Who angled for the Federal Reserve? The American public, or the bankers themselves? Anyone reading Rothbard knows the answer. It is not reasonable to expect us to believe that in just this one case, an interest group coming together to enshrine its preferences in law was doing so entirely for the public welfare.

The Fed, meanwhile, has not “stabilized the economy,” contrary to the usual propaganda, and in recent years gave rise to a housing bubble that wrecked the finances of a great many ordinary Americans. Then, adding insult to injury, it bailed out – on preposterous and indefensible grounds – some of the most reckless and irresponsible institutions.

What has the Fed’s economic planning accomplished for Main Street? The Fed’s planning, according to David Stockman, was based on the “wealth effect”: if the Fed pushed stock prices higher, Americans would feel wealthier and would be likely to spend and borrow more, thereby stimulating economic activity.

The results? Zero net breadwinner jobs created between early 2000 and early 2007. From 2000 to 2012, there have been 18,000 new jobs created each month. That’s about one-eighth of the growth in the labor force over the same period.

This is what the average person is supposed to be so grateful for?

The state, in short, enriches itself at the expense of the public it fleeces, all the while using its influence over education, the media, and culture to persuade the people that all this fleecing is good for them, that taxes are donations, and that bombing foreigners on ludicrous pretexts is “serving your country.” It urges the general public to consider the absence of the state as the most horrifying, inconceivable scenario of all.

The libertarian tears off the mask of the state, revealing it as the wealth-destroying, poverty-enhancing instrument of terror and expropriation it is. The advances that constitute civilization, libertarians argue, have resulted not from the orders of hangmen and other executioners, or the social planning of bureaucrats and academics, but from human beings cooperating voluntarily in ways that will amaze and astonish anyone who opens his eyes to see them.

And that makes libertarianism the most liberating political philosophy of all.

Llewellyn H. Rockwell, Jr. [send him mail], former editorial assistant to Ludwig von Mises and congressional chief of staff to Ron Paul, is founder and chairman of the Mises Institute, executor for the estate of Murray N. Rothbard, and editor of His most recent book is Against the State: an Anarcho-Capitalist Manifesto. Follow him on Facebook and Twitter.

This article was originally published at and is reprinted here under a Creative Commons license. 

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by

Congress And The Fed Refuse To Learn From Their Mistakes

This month marks the seventh anniversary of the bursting of the housing bubble and the subsequent economic meltdown. The mood in Congress following the meltdown resembled the panicked atmosphere that followed the September 11th attacks. As was the case after September 11th, Congress rushed to pass hastily written legislation that, instead of dealing with the real causes of the crisis, simply gave the government more power.

Just as few understood the role our interventionist foreign policy played in the September 11th attacks, few in Congress understood that the 2008 meltdown was caused by the Federal Reserve and Congress, not by unregulated capitalism. Not surprising to anyone familiar with economic history, the story of the 2008 meltdown starts with the bursting of the Fed-created tech bubble.

Following the collapse of the tech bubble, the Fed began aggressively pumping money into the economy. This money flooded into the housing market, creating the housing bubble. The Bush Administration and the Republican Congress also added fuel to the housing bubble. These so-called “free-market” conservatives expanded federal housing programs in hopes of creating an “ownership society.”

If Congress understood the Austrian theory of the business cycle, it would have allowed the recession that followed the housing bubble’s inevitable collapse to run its course. Recessions are the economy’s way of eliminating the distortions caused by the Federal Reserve. Attempts by Congress and the Fed to end a recession via inflation and government spending will only lead to future, and more severe, economic downturns.

The corporate bailouts, government spending, and money creation via quantitative easing that Congress and the Fed have engaged in since the fall of 2008 have failed to produce even the illusion of prosperity. The daily experience of most Americans shows that the government’s doctored statistics drastically understate both unemployment and inflation.

This is not to say that no Americans have benefited from Federal Reserve policies. Even Donald Trump has called quantitative easing “a great deal for guys like me.” Much of the growth of government over the past seven years, from the bailouts to the increases in military and domestic spending to Obamacare, has also benefited politically-connected crony capitalists.

The Federal Reserve’s continued delay of an interest rate increase suggests that, contrary to its public statements, the Fed understands that the economy has not recovered from the meltdown and is on the brink of another major recession. Fear that the Fed is not being fully forthcoming with its view of the economy is one reason the stock market declined following the Fed’s recent decision to once again postpone increasing interest rates.

Learning the full truth about how the Fed evaluates the economy and its plans to respond to another downturn are two reasons why it is important to pass the Audit the Fed bill.

A vote on Audit the Fed would probably be the only good thing to occur in Congress this year. A Congress that cannot defund Planned Parenthood is unlikely to make any serious cuts in spending. Instead of waiting for politicians to do the right thing, those who know the truth must spread the ideas of liberty as far and wide as possible. Only when the teachings of the Austrian school are embraced by a critical mass of Americans will Congress cut warfare spending, cut welfare spending, and audit, and then end, the Fed.

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by

Congress Fiddles While The Economy Burns

Reports that the official unemployment rate has fallen to 5.1 percent may appear to vindicate the policies of easy money, corporate bailouts, and increased government spending. However, even the mainstream media has acknowledged that the official numbers understate the true unemployment rate. This is because the government’s unemployment figures do not include the 94 million Americans who have given up looking for work or who have settled for part-time employment. John Williams of Shadow Government Statistics estimates the real unemployment rate is between 23 and 24 percent.

Disappointingly, but not surprisingly, few in Washington, D.C. acknowledge that America’s economic future is endangered by excessive spending, borrowing, taxing, and inflating. Instead, Congress continues to waste taxpayer money on futile attempts to run the economy, run our lives, and run the world.

For example, Congress spent the majority of last week trying to void the Iranian nuclear agreement. This effort was spearheaded by those who think the U.S. should waste trillions of dollars on another no-win Middle East war. Congressional war hawks ignore how America’s hyper-interventionist foreign policy feeds the growing rebellion against the dollar’s world reserve currency status. Of course, the main reason many are seeking an alternative to the dollar is their concern that, unless Congress stops creating — and the Federal Reserve stops monetizing — massive deficits, the U.S. will experience a Greek-like economic crisis.

Despite the clear need to reduce federal spending, many Republicans are trying to cut a deal with the Democrats to increase spending. These alleged conservatives are willing to lift the “sequestration” limits on welfare spending if President Obama and congressional Democrats support lifting the “sequestration” limits on warfare spending. Even sequestration’s miniscule, and largely phony, cuts are unbearable for the military-industrial complex and the rest of the special interests that control our government.

The only positive step toward addressing our economic crisis that the Senate may take this year is finally holding a roll call vote on the Audit the Fed legislation. Even if the audit legislation lacks sufficient support to overcome an expected presidential veto, just having a Senate vote will be a major step forward.

Passage of the Audit the Fed bill would finally allow the American people to know the full truth about the Fed’s operations, including its deals with foreign central banks and Wall Street firms. Revealing the full truth about the Fed will likely increase the number of Americans demanding that Congress end the Fed’s monetary monopoly. This suspicion is confirmed by the hysterical attacks on and outright lies about the audit legislation spread by the Fed and its apologists.

Every day, the American people see evidence that, despite the phony statistics and propaganda emanating from Washington, high unemployment and rising inflation plague the economy. Economic anxiety has led many Americans to support an avowed socialist’s presidential campaign. Perhaps more disturbingly, many other Americans are supporting the campaign of an authoritarian crony capitalist. If there is a major economic collapse, many more Americans — perhaps even a majority — will embrace authoritarianism. An economic crisis could also lead to mob violence and widespread civil unrest, which will be used to justify new police state measures and crackdowns on civil liberties.

Unless the people demand an end to the warfare state, the welfare state, and fiat money, our economy will continue to deteriorate until we are faced with a major crisis. This crisis can only be avoided by rejecting the warfare state, the welfare state, and fiat money. Those of us who know the truth must redouble our efforts to spread the ideas of liberty.

© Copyright 2015 Ron Paul

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by