Ron Paul: Even The Fed is Afraid It Will Crash the Economy


April 18, 2016—Dr. Ron Paul decided to use his column for the Ron Paul Institute for Peace and Prosperity to discuss the Federal Reserve chair’s meeting with President Barack Obama in detail.

The recent “hastily arranged secret meeting” between Federal Reserve Chair Janet Yellen and Obama was arranged after the Federal Reserve announced that its chair would be having secret meetings. While all the White House claims is that the president, Vice President Joe Biden, and Yellen simply “exchanged notes,” what was discussed behind closed doors wasn’t unveiled. Former congressman Paul believes he may have a good guess as to what Yellen may have told the president.

He writes:

“Yellen’s secret meeting at the White House followed an emergency secret Federal Reserve Board meeting. The Fed then held another secret meeting to discuss bank reform. These secret meetings come on the heels of the Federal Reserve Bank of Atlanta’s estimate that first quarter GDP growth was .01 percent, dangerously close to the official definition of recession.

Thus the real reason for all these secret meetings could be a panic that the Fed’s eight year explosion of money creation has not just failed to revive the economy, but is about to cause another major market meltdown.

Establishment politicians and economists find the Fed’s failures puzzling. According to the Keynesian paradigm that still dominates the thinking of most policymakers, the Fed’s money creation should have produced such robust growth that today the Fed would be raising interest rates to prevent the economy from ‘overheating.’

The Fed’s response to its failures is to find new ways to pump money into the economy. Hence the Fed is actually considering implementing ‘negative interest rates.’ Negative interest rates are a hidden tax on savings. Negative interest rates may create the short-term illusion of growth, but, by discouraging savings, they will cause tremendous long-term economic damage.

Even as Yellen admits that the Fed ‘has not taken negative interest rates off the table,’ she and other Fed officials are still promising to raise rates this year. The Federal Reserve needs to promise future rate increases in order to stop nervous investors from fleeing US markets and challenging the dollar’s reserve currency status.

The Fed can only keep the wolves at bay with promises of future rate increases for so long before its polices cause a major dollar crisis. However, raising rates could also cause major economic problems. Higher interest rates will hurt the millions of Americans struggling with student loan, credit card, and other forms of debt. Already over 40 percent of Americans who owe student loan debt are defaulting on their payments. If Federal Reserve policies increase the burden of student loan debt, the number of defaults will dramatically increase leading to a bursting of the student loan bubble.

By increasing the federal government’s cost of borrowing, an interest rate increase will also make it harder for the federal government to manage its debt. Increased costs of debt financing will place increased burden on the American people and could be the last straw that finally pushes the federal government into a Greek-style financial crisis.

The no-win situation the Fed finds itself in is a sign that we are reaching the inevitable collapse of the fiat currency system. Unless immediate steps are taken to manage the transition, this collapse could usher in an economic catastrophe dwarfing the Great Depression. Therefore, those of us who know the truth must redouble our efforts to spread the ideas of liberty.

If we are successful we may be able to force Congress to properly manage the transition by cutting spending in all areas and auditing, then ending, the Federal Reserve. We may also be able to ensure the current crisis ends not just the Fed but the entire welfare-warfare state.”

Is Ron Paul right to think Yellen is afraid that her policies will lead to a market meltdown? Share you thoughts with us!

Image Credit: Gage Skidmore.

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