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The Crack-Up Is Coming
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Some Federal Reserve officials are calling for tougher banking regulations in order to prevent the Fed’s low interest rate policy from leading investors to take “excessive” risks that will create asset bubbles. The Fed is understandably worried that these bubbles will burst leading to another market meltdown. However, the boom-and-bust cycle will not end because regulators stop investors from taking “excessive” risks. Almost every bubble and economic downturn America has experienced over the past 107 years was caused by the Federal Reserve’s manipulation of the money supply.

The Federal Reserve’s actions artificially lower interest rates, thus distorting the signals sent by the rates, which are the price of money. Artificially low interest rates cause investments to be made in projects that are not supported by the real underlying market conditions. This results in a boom, inevitably followed by a crash, then by a new round of money creation and government bailouts restarting the cycle.

Increased regulations will not just fail to head off the next crash, they will make the next recession worse. Federal regulators are not capable of determining what is “excessive” risk. Instead, that determination is best left to market participants. Regulators are subject to having the same Fed-induced distorted view of the marketplace as nearly everyone else. Thus, regulators may mistake a growing asset bubble as a thriving sector of the economy that will serve as a long-term source of growth. This is especially the case if, as with the housing bubble, government policies such as the Community Reinvestment Act encourage the malinvestments. Also, regulators may impede the growth of businesses that are actually responding to real economic conditions instead of Fed-created illusions.

Support among the people, if not among the financial and political elites, for auditing and even ending the Fed, as well as for cryptocurrencies and precious metals, suggests we may soon reach what Ludwig von Mises referred to as the “crack-up.” The crack-up occurs when enough people realize that continuous expanding of the money supply, and the accompanying decline in a currency’s purchasing power, is a feature of central banking. Therefore, they spend their money as soon as they get it, accelerating the rise of hyperinflation.

Concerns over the effects of the US government’s debt, the precarious American economic condition, and growing resentment of US foreign policy have led to a decline in the dollar’s international value. Eventually, these factors will lead to a rejection of the dollar’s world reserve currency status.

Rejection of the dollar’s reserve currency status abroad and the crack-up at home will cause an economic meltdown worse than the Great Depression. Among the problems this will lead to is increased violence as some Americans who believe they are entitled to live off the stolen property of others cut out the government middleman and start stealing from their fellow citizens.

The only way to avoid this fate is to spread the ideas of liberty among the people. A strong liberty movement that can pressure politicians to cut spending, audit and end the Fed, legalize competing currencies, and stop promoting divisive identity politics is the key to peacefully transitioning away from the Keynesian welfare-warfare state to a free society.

(Republished from The Ron Paul Institute by permission of author or representative)
 
• Category: Economics • Tags: Federal Reserve 
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  1. The Lock Downs and Silicon Valley’s egregious Orwellian censorship and deplatforming are terrible for the economy over all, and also serve as cautions to anyone that is considering opening a business, either bricks and mortar or virtual. And isn’t that exactly what they are demanding? Exclusivity and a mandate to depend on them?

    Let the Nuremburg 2 trials commence in America!

    This is completely unacceptable! There are already many unemployed. The financial fraud and the scientific fraud that occured have destroyed the country, the economy, and the future. Unless the prosecutions start, there will be no recovery, because there are too many disincentives to open businesses! If someone can simply shut that business down based on scientific fraud and steal it for themselves, only the corrupt will purchase new businesses in league with other corrupt people, and trusting corrupt people never works out. It always ends in disaster. Mafia families and mafia turf wars prove this, as well as other street gangs. Trump should know this, since he is a business man!

    It has to be dealt with.

    Andrea Iravani

    • Agree: Achmed E. Newman
    • Replies: @BuelahMan
    , @Emslander
  2. BuelahMan says:
    @No Friend Of The Devil

    Let the Nuremburg 2 trials commence in America!

    Can I offer up the fake human skin lampshades, the shrunken heads, and the human fat soap?

    I don’t know why anyone uses Nuremberg as an example, when it was so full of lies and distortions and torture-inspired admission. It is precisely what we DON’T need.

    • Replies: @GeeBee
  3. GeeBee says:
    @BuelahMan

    Well said. All of the depressingly overused imagery from Germany’s twelve years of freedom should be anathema to those of us who understand how the post-war world works, and why. Anyone on ‘our’ side invoking terms such as ‘Nazi’, ‘the Gestapo’, ‘the SS’, ‘Hitler’ (we should always accord him the courtesy of adding his first name), ‘Nazi war-crimes/atrocities’, ‘the death camps’ and not least, as you remark, ‘Nuremberg’, in what they imagine to be furtherance of our agenda, should be called out on this extremely bad error in no uncertain terms. All this sort of usage does is to confirm that the culprit has swallowed the propaganda hook, line and sinker, and is, in effect, on the same page as those who push this same propaganda. They are, in fact, albeit unwittingly, agents of our nemesis, furthering their vile propaganda.

    Like it or not, National Socialist Germany was our best – possibly our last – chance of avoiding this shallow, soulless, deracinated materialist dystopia in which we are forced to live.

    • Agree: BuelahMan
  4. A123 says:

    Trump’s plan for re-industrialization presents the way forward. Ultimately, making things creates value.

    As bad as the USD may be, every other currency is worse. The EUR is crippled by internal EU strife and has no credible central bank. The value of the Chinese RMB is based on statistical fraud and outright lies. If the USD implodes there will be a period of little to no international trade as all major currencies fail along with the dollar.

    If currencies go, a replacement will appear. Large-scale barter is simply unworkable for the long term. Self sufficiency in raw materials and productive output will control which nations emerge first and most successfully from any currency turmoil.

    PEACE 😇

    • Replies: @Miro23
  5. Sirius says:

    If the USD loses its world reserve currency status, the US is indeed in for some very hard times, including potential hyperinflation.

    The main factor in its favor is that there is no currency strong enough to take its place. But that is not a good position to be in. Circumstances can change, and judging by federal mismanagement for the last 2 or more decades, they will. The main question is how long.

    How long is critical, because it says how much time the US has to reverse the trend, which is still possible. None of the last 3 administrations have taken the right steps. Look at the government debt increases for the last 20 years: debt increases that did not invest in infrastructure as during the Eisenhower years (when there was also high debt) but rather went into casino capitalism and propping up Wall Street.

    This is not sustainable but it is reversible. Ironically the opposite happened in 2020 under the cover of the pandemic making the reversal that much more difficult.

    • Replies: @Jokem
  6. Jokem says:
    @Sirius

    ‘debt increases that did not invest in infrastructure as during the Eisenhower years’

    I am not sure if you are considering the Interstate Highway System.

    • Troll: Greta Handel
    • Replies: @Greta Handel
  7. @Jokem

    You’ve entirely misread it. Sirius is comparing the infrastructural expenditures of the Eisenhower years to the financial manipulations of the last 20.

    Isn’t that clear from the context? Once again, your cluelessness comes across as deft trolling. In fact, now that I’m privileged, time to use that often misunderstood button.

    • Replies: @Sirius
  8. Sirius says:
    @Greta Handel

    and @Jokem

    Indeed, that is what I was referring to, as well as other investments in the future like the GI Bill. I was contrasting the 2 eras.

    • Replies: @Jokem
  9. Jokem says:
    @Sirius

    Got it. Thanks for explaining without name calling…

  10. That was a great summation of the financial state and problem of the country. Each paragraph laid out a problem in plain English, and each built on the last to demonstrate why the SHTF time is coming for America.

    Then we get to that last pie-in-the-sky paragraph of hope by Dr. Paul, as usual, saying that current-era Americans will go for these ideas of liberty. Are you kidding me? We’ve let in 50 million people over the last 55 years from places where almost nobody understands these ideas of liberty. Are you going to explain these ideas to a Nigerian or Chinaman? Will the Guatemalans and Somalians get on board with your and my views about the Federal Reserve? Try to picture that in your mind.

    Identity politics is what you get when you import a Tower of Babel, Ron Paul. In fact, White People had better get their ID politics in order, as all the rest of it is against them.

    Sorry, I’ve agreed with you for 25 years, Dr. Paul, but you and Pat Buchanan write columns that make me think the last time you walked around among Americans was in 1960.

    Demography is destiny. I wish I were wrong about this.

    • Replies: @Jokem
  11. Miro23 says:
    @A123

    As bad as the USD may be, every other currency is worse. The EUR is crippled by internal EU strife and has no credible central bank.

    The current runner-up to the US Dollar is the Euro, so if the Dollar went, the Euro would have a big role. Brussels wouldn’t mind since it would keep interest rates low and open up a lot of possibilities for deficit financing. The Euro would also probably be the first choice of Russia and the ME oil states. The ECB has a lot of credibility.

    • Replies: @Justvisiting
  12. Jokem says:
    @Achmed E. Newman

    ‘We’ve let in 50 million people over the last 55 years from places where almost nobody understands these ideas of liberty. ‘

    That would be fine if we embraced the concept of assimilation into the melting pot instead of diversity.
    Diversity makes relationships more complex, which would not be so bad if we embraced States Rights instead of jamming everyone into a one-size-fits-all concept.

    I have to agree with you, I think this has gone too far to be reversed.

  13. @Miro23

    The ECB has a lot of credibility.

    Thanks for the belly laugh.

    This is a race to the bottom–with accelerators hitting the floor.

  14. “Federal regulators are not capable of determining what is “excessive” risk. Instead, that determination is best left to market participants. Regulators are subject to having the same Fed-induced distorted view of the marketplace as nearly everyone else. Thus, regulators may mistake a growing asset bubble as a thriving sector of the economy that will serve as a long-term source of growth. This is especially the case if, as with the housing bubble, government policies such as the Community Reinvestment Act encourage the malinvestments. Also, regulators may impede the growth of businesses that are actually responding to real economic conditions instead of Fed-created illusions.”
    Mr Paul has some sense of the problem, but his “libetarianism” distorts his vision.
    The “flies in his eyes” have him seeing giant US “regulators”. He sees “thriving sectors” of the economy — Silicon valley, at a guess, is the obvious candidate (H1B visa anyone ?). The fact is the US economy has, increasingly, since the 80’s ? 90’s ? depended on asset inflation for “growth” or any “thriving”. The Fed is not the cause of this, it is the TOOL. Regulation (LOL) has also been another tool used by Wall St to create then suck wealth from the economy.
    Mr Paul, needs to actually see what has become of “Capitalism” in the 21st C, then he might see the disease, rather than merely the symptoms.

    • Replies: @Jokem
  15. Jokem says:
    @animalogic

    Big company’s like regulation because they can more easily comply with the regulation than small competitors.
    This is another example of the Constitution being interpreted to apply ‘Interstate Commerce’ to companies which do not do business out of state.

  16. Emslander says:
    @No Friend Of The Devil

    But, if the manipulators can create 15 to 20 million votes on the national level for any candidate they want, even a nearly comatose masked man, how does the will of the people who are schooled in liberty manifest itself?

  17. IMO the author’s analysis is spot-on, at least as far as the American-centric world-view is concerned.

    But then, near the end of the article, there’s this…

    The only way to avoid this fate…

    We all pretty much have some idea of how to fix the problem(s), but nothing happens, no-one in a position to do so actually does anything substantive, in fact the problem(s) just keep snowballing.

    Where’s our Knight in shining armour? Dream on.

    As I’ve suggested in other threads, the simplest path to a solution (for the rest of the world, at least) might be the implosion and disintegration of the USA.

    Might even be a blessing for the long-suffering citizens of the USA.

    • Replies: @Jokem
  18. Jokem says:
    @Ultrafart the Brave

    You mean session?
    The War Between the States settled that matter, regardless of the justification.

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