.jpg "Tony Petersen")
In Michael Moore’s new documentary, “Capitalism: A Love Story,â€Â the left-wing filmmaker blames our country’s economic woes on greedy capitalists, saying, “capitalism is evil, and you can’t regulate evil.â€Â
Ron Paul, in his newest bestseller, believes differently.
“End the Fed,â€Â Paul’s manifesto on the Federal Reserve System (the United States’ national bank), is a short, easy to understand read that cogently explains that the mess we are in is no fault of a free-market, capitalist-based system — it’s due to a lack thereof.
“The Federal Reserve should be abolished,â€Â says Dr. Paul, “because it is immoral, unconstitutional, impractical, promotes bad economics and undermines liberty. Its destructive nature makes it a tool of tyrannical government.â€Â (Tell us how you really feel…)
According to Paul, the Federal Reserve — indeed, all national banks — is the cause of the boom-bust (business) cycle and that it is not inherent in free-market economies.
In a free-market economy, interest rates act as the price of borrowing. When people save more than they consume, interest rates go down. When people consume more than they save, interest rates go up.
In this way, businesses can see if people want to spend in the present (in which case it would make no sense borrowing vast amounts of money to embark on investment projects) or if the citizenry want to spend in the future. Businesses decisions are made accordingly.
In an economic system in which interest rates are controlled by a central regulator (a national bank) the price of borrowing can be changed at the whim of whoever is in charge. This explains why interest rates have been as high as 20 percent and as low as less than one percent (where the interest rate currently lies).
In this type of economy, investors can be fooled by low interest rates, thinking that there are enormous pools of resources from which they can borrow from, when in fact they are insufficient to carry out their specified task. Losses ensue and panics/recessions/depressions happen.
This is a very convincing argument. How else do we explain how so many successful businesses can all of a sudden fail? That they just do is not a sufficient explanation.
The goals of the Fed are to stabilize the currency and prevent the economy from fluctuating from astronomical highs to devastating lows.
How have they done?
The purchasing power of one dollar in 1913 (when the Federal Reserve was created) has fallen to $0.05. Yes, that̢۪s five cents. So, I feel pretty safe in saying that they̢۪ve failed on the stabilizing of the currency front.
As for eradicating recessions, well, they̢۪ve fallen short there too. According to the National Bureau of Economic Research, since the Fed was created, the United States has had 18 separate instances when the country̢۪s economic output decreased.
What to do? While Dr. Paul̢۪s solution of ending the Fed may seem too radical for some, an interim step is a bill currently being considered in the House of Representatives that would audit the Federal Reserve, allowing Congress to find out which banks the Fed has lent money to and other information regarding monetary policy (it seems like such a common-sense idea that it̢۪s amazing that it̢۪s not already a law).
Mr. Moore thinks capitalism ‘evil’, but what he mistakenly calls capitalism is actually an economy that Karl Marx could find areas of agreement with.
Sean Lowrie • Oct 22, 2009 at 4:54 pm
Tony,
I’d very much like to read End the Fed for myself. May I borrow it from you?
Sean Lowrie • Oct 22, 2009 at 11:54 pm
Tony,
I’d very much like to read End the Fed for myself. May I borrow it from you?
GABEnTX • Oct 17, 2009 at 6:04 am
GREAT JOB!! Very convincing!
Anonymous • Oct 17, 2009 at 1:04 pm
GREAT JOB!! Very convincing!
BD • Oct 14, 2009 at 4:19 pm
Nice. A college kid in california gets it. You, sir, are a rarity.
BD • Oct 14, 2009 at 11:19 pm
Nice. A college kid in california gets it. You, sir, are a rarity.
Conner • Oct 14, 2009 at 2:43 pm
Nice synopsis. I’m glad you are studying Ron and more importantly, Austrian economics. This is a good for a ‘straight to the point’ breakdown of free market interest rates. Keep posting such useful information for the uneducated.
Conner • Oct 14, 2009 at 9:43 pm
Nice synopsis. I’m glad you are studying Ron and more importantly, Austrian economics. This is a good for a ‘straight to the point’ breakdown of free market interest rates. Keep posting such useful information for the uneducated.
Jake Syma • Oct 14, 2009 at 12:42 pm
I’m not normally one to quote Ayn Rand, but why reinvent the wheel:
“Capitalists with government help…the worst of all economic phenomenon.” — Ayn Rand
Jake Syma • Oct 14, 2009 at 7:42 pm
I’m not normally one to quote Ayn Rand, but why reinvent the wheel:
“Capitalists with government help…the worst of all economic phenomenon.” — Ayn Rand
Alexius • Oct 14, 2009 at 12:03 pm
What Mr. Moore fails to mention in his documentary is that “crony” capitalism is the cause of the evil. He even admitted that in an interview. But, he mistakenly believe that crony capitalism and capitalism are the same thing. They are not.
The federal reserve is one of the sources of crony capitalism. Well connected (to the government) businesses get the government to cover losses and to eradicate competition. All these billions of dollars being handed out cannot exist without the fed. Can you imagine if the government came to you last fall and demanded 50,000 from you so they could hand out billions to the banks? Since the government doesn’t have any money, and all it gives out it must take from somewhere, it ends up taking the money in the form of printing more dollars.
Printing more dollars makes each one in existence (the ones you have in your pocket) worth less. So the fed and all its money creation is just another way of taxing you that you won’t notice.
Capitalism is when business competes with other businesses on a level playing field with laws that prevent fraud and uphold contracts. Capitalism creates wealth and makes us all better off. Crony capitalism is when businesses use the power of the government to steal from other businesses or the people. Crony capitalism makes most of us worse off- with the exception of the thieves. They do quite well.
There is a BIG difference Mr. Moore. You cannot expect the state to stamp out crony capitalism because the state caused and benefits from crony capitalism. If you get the diagnosis wrong, then you can’t possible get the solution right.
And thanks Mr. Petersen. Nice article.
Alexius • Oct 14, 2009 at 7:03 pm
What Mr. Moore fails to mention in his documentary is that “crony” capitalism is the cause of the evil. He even admitted that in an interview. But, he mistakenly believe that crony capitalism and capitalism are the same thing. They are not.
The federal reserve is one of the sources of crony capitalism. Well connected (to the government) businesses get the government to cover losses and to eradicate competition. All these billions of dollars being handed out cannot exist without the fed. Can you imagine if the government came to you last fall and demanded 50,000 from you so they could hand out billions to the banks? Since the government doesn’t have any money, and all it gives out it must take from somewhere, it ends up taking the money in the form of printing more dollars.
Printing more dollars makes each one in existence (the ones you have in your pocket) worth less. So the fed and all its money creation is just another way of taxing you that you won’t notice.
Capitalism is when business competes with other businesses on a level playing field with laws that prevent fraud and uphold contracts. Capitalism creates wealth and makes us all better off. Crony capitalism is when businesses use the power of the government to steal from other businesses or the people. Crony capitalism makes most of us worse off- with the exception of the thieves. They do quite well.
There is a BIG difference Mr. Moore. You cannot expect the state to stamp out crony capitalism because the state caused and benefits from crony capitalism. If you get the diagnosis wrong, then you can’t possible get the solution right.
And thanks Mr. Petersen. Nice article.
Desh • Oct 14, 2009 at 11:02 am
Very well said, and clearly written. Dr. Paul eloquently states the facts without letting emotion take control. The facts are the facts, and it seems that A LOT of the cause for our financial distraught has been brought about by Big Government, and in turn The Fed.
Desh • Oct 14, 2009 at 6:02 pm
Very well said, and clearly written. Dr. Paul eloquently states the facts without letting emotion take control. The facts are the facts, and it seems that A LOT of the cause for our financial distraught has been brought about by Big Government, and in turn The Fed.