Thursday, November 4, 2010

Ron Paul on the Fed

This is an old one, but wonderfully put:

Ever seen the Fed’s marble palace in Washington, DC, on Constitution Avenue (of all streets!)? That bunch sure knows how to live. I’ve long had a dream of being the auctioneer when the Fed is sold off for private offices, or maybe a Museum of Sound Money! Help me dull its scissors and then break them, so the Fed can’t cut down our dollar’s value. Indeed, I believe that people ought to be ashamed to work at such a place; an institution that has done so much damage to American prosperity and freedom, as well as to the freedom and prosperity of the whole world. For example, I want no more bowing and scraping to the Fed chairman when he goes to Capitol Hill to peddle his nonsense. He is just a bureaucrat, albeit a disastrous one.
If printing money created prosperity, everyone would be prosperous. Instead, as every entrepreneur knows, prosperity requires discipline, hard work, and careful planning.

Of course, a committee of economics professors wouldn't know anything about this. The entire point, the endgame, of becoming a professor is to insulate yourself from market forces by getting tenure.

Gary North wrote an excellent piece recently that describes a litmus test for free market economists.
When you hear a self-designated free market economist defend the idea of central banking, meaning a government-licensed monopoly over the monetary base, you can be sure that this person does not believe in the free market. He does not believe in the logic of decentralized private property. He believes in central planning, and he sees the central bank as the agency of such planning.
The Federal Reserve's latest round of "quantitative easing" is primarily jacking up prices of the easily horded commodities like gold and silver. Today's equity market reaction to the Fed announcement is basically a short squeeze. Lower quality names outperforming high quality.

But over the longer term, you would expect the commodity rally to benefit the energy sector (which is currently cheap) and hurt makers of gas guzzling recreational vehicles and other consumer discretionary companies (which are currently very expensive, go figure).

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