Here’s What The Markets Are Telling Us…

Last week, U.S. stock markets tumbled yet again, leaving the Dow Jones index down almost 1,500 points for the year. In fact, most major world markets are in negative territory this year.

There are many Wall Street cheerleaders who are trying to say that this is just a technical correction, that the bottom is near, and that everything will be getting better soon. They are ignoring the real message the markets are trying to send: you cannot print your way to prosperity.

People throughout history have always sought to acquire wealth. Most of them understand that it takes hard work, sacrifice, savings, and investment. But many are always looking for that “get rich quick” scheme. Monetary cranks throughout history have thought that just printing more money would result in greater wealth and prosperity. Every time this was tried, it resulted in failure. Huge economic booms would be followed by even larger busts. But no matter how many times the cranks were debunked both in theory and practice, the same failed ideas kept coming back.

The intellectual descendants of those monetary cranks are now leading the world’s central banks, which is why the last decade has seen an explosion of money creation. And what do the central bankers have to show for it? Lackluster employment numbers that have not kept up with population growth, increasing economic inequality, a rising cost of living, and constant fear and uncertainty about what the future holds.

The past decade has been a lot like the 1920s, when prices wanted to drop but the Federal Reserve kept the price level steady through injections of easy money into the economy. The result in the 1920s was the Great Depression. But in the 1920s, prices were dropping because of increased production. More goods being produced meant lower prices, which the Fed then tried to prop up by printing money. Unlike the “Roaring 20s,” however, the economy isn’t quite as strong today. It’s more of a gasp than a roar.

Production today is barely above 2007 levels, while heavily-indebted households already hurt during the financial crisis don’t want to keep spending. The bad debts and malinvestments from the last Federal Reserve-induced boom were never liquidated; they were merely papered over with more easy money.

The underlying economic fundamentals remain weak, but the monetary cranks who run the Fed keep trying to pump more and more money into the system. They fail to realize that easy money is the cause, not the cure, of recessions and depressions. They didn’t realize that prices needed to drop in order to clear all the bad debt and malinvestments out of the system. Because they don’t realize that, we are on the verge of yet another financial crisis.

Don’t be confused by any stock market rallies over the next few months and think that the worst is over. Remember that after Black Tuesday in 1929, the Dow Jones rallied over the next year before it began slowly and steadily to sink again.

The central bankers will do everything they can to delay the inevitable. If they had allowed housing prices to fall in 2008 and hadn’t bailed out the big Wall Street banks, the economy would have corrected itself. Yes, it would have been a severe correction, but it would have been nothing compared to the inevitable correction that will present itself when the Fed runs out of easy money options.

The Fed may try to cut interest rates again, maybe even going negative; or it will do more quantitative easing, but that won’t work. Creating more money does not lead to economic growth and well-being. The more money the Federal Reserve creates, the more ordinary Americans will end up suffering.

© Copyright 2016 Ron Paul

BREAKING: Panic Spreading Across Financial World After People Wake Up To Nasty Surprise

Fears over China’s economy sent stock markets tumbling worldwide on Monday, the first trading day of the year.

The selloff was sparked by a new report showing China’s manufacturing sector contracted during the end of 2015, according to CNN Money. The Shanghai Composite index plummeted nearly 7 percent for the day before trading was halted, while the Dow Jones Industrial Average and Nasdaq fell over two percent on Monday morning.

“Even though the manufacturing report was disappointing, it’s just the latest sign of a slowdown in China. Analysts said selling in Chinese markets was also driven by other factors, including the scheduled lifting of bans on IPOs (public offerings) and sales by larger investors,” CNN reported.

“With headwinds both domestic and external, investors feared a hard landing may be inevitable and rushed to the exits,” Emma Dinsmore, CEO of R-Squared Macro Management, wrote in a client note.

“More fluctuations in global markets are expected now that the U.S. Federal Reserve has started raising interest rates. The government needs to pay more attention to external risk factors in the short term and fine-tune macroeconomic policies accordingly so the economy does not fall off a cliff,” Caixin chief economists He Fan said, according to Business Insider

Another source for concern with investors is the volatility in the oil markets caused by rising tensions in the Middle East. Oil prices spiked 3.5 percent after news that Saudi Arabia (the world’s second largest oil producer) was severing diplomatic ties with Iran.

Breaking: Federal Gov’t Just Made This Big Move For The First Time In 9 Years- And It Means…

The Federal Reserve, for the first time in nine years, voted to increase interest rates on Wednesday, marking a move away from the easy money, interventionist policy initiated during the financial crisis of 2008.

“The policy-setting Federal Open Market Committee [FOMC] voted unanimously to raise rates by 0.25% to a range of 0.25%-0.50%, not a whole lot but enough to test the still-weakened U.S. economy’s ability to absorb the higher borrowing costs that will follow the increase,” Fox Business reported

“The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise over the medium term to its 2% objective,” the FOMC said in its statement released at the conclusion of Wednesday’s meeting.

The real world implications for the consumer include higher costs for borrowing money for big ticket items such as homes, cars, and appliances. The danger, if the Federal Reserve keeps interests rates artificially low for too long, is that inflation will be ignited, hurting consumers’ buying power and ultimately the health of the economy.

The historic norm for interest rates is 4 percent, the Washington Post reports.

Federal Reserve Chair Janet Yellen said on Wednesday that although inflation is currently low right now, the Federal Reserve believes that is due to “transitory factors,” referring to the current glut in the oil market among other things.

She also noted that it takes time for monetary policy actions by the Federal Reserve to work their way into the economy, so acting gradually now would avert the need for more drastic moves later, which could push the economy into recession.

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.

Follow me on Twitter.

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