Exactly How Much Are the Banksters Stealing?
by Ron Paul
Before the US House of Representatives, Committee on Financial Services, Subcommittee on Domestic Monetary Policy and Technology Hearing on: “Audit the Fed: Dodd-Frank, QE3, and Federal Reserve Transparency,” October 4th, 2011
In his 1974 Nobel Prize address, the late Austrian economist Friedrich von Hayek attacked the pretense of knowledge, the idea that policymakers have sufficient knowledge and power to shape society as they wish. Our political leaders failed to take Hayek’s message to heart, as succeeding generations have continued to allow this intellectual arrogance to continue unabated. Just as the New Mandarins squandered America’s wealth, resources, and young men during the 1960s, today’s economic Mandarins seem hell-bent on destroying every last vestige of the free market and driving the economy into ruin. Congress has abdicated its oversight over these “expert” economists at the Federal Reserve, to the detriment of the economic well-being of the American people. Despite overwhelming grassroots support behind auditing the Fed, only incremental progress has been made toward unmasking the Federal Reserve’s activities. Full transparency of the Fed’s operations remains an elusive goal, but one towards which I intend to devote my remaining time in Congress.
The Fed has been given a monopoly by Congress to conduct monetary policy, and in so doing it tinkers with the most important price of all, the rate of interest. Interest rates reflect the price of time, and changes in the interest rate affect the structure of production. Forcing changes to the interest rate, as the Fed does, has a more pronounced effect on the economy than any law Congress has ever passed. Interest rates are used by individuals to make decisions about what type of investments they undertake, how much money they invest, and for how long. The higher the interest rate, the more likely an individual is to save money; the lower the interest rate, the less likely he is to save. Borrowers take the interest rate into account when borrowing money to buy a house, pay college tuition, or start or expand a business. The lower the interest rate, the cheaper it becomes to borrow money and the more likely individuals are to borrow; the higher the interest rate, the less likely they are to borrow. In a free market, some people will want to save while others will want to borrow, and the interest rate is the price that coordinates the actions of borrowers and savers.