EXAMINING THE LINK BETWEEN FED BANK SUPERVISION AND MONETARY POLICY
We are fortunate to have both the current Chairman and a former Chairman who are appearing today to inform us on these difficult issues, and with that, I will reserve the balance of our time
and recognize Dr. Paul, my counterpart, the ranking member of the subcommittee.
2010 Ron Paul 59:2
Yesterday was an important day because it was the day the FOMC met and the markets were hanging in there, finding out what will be said at 2:15, and practically, they were looking for two words, whether or not two words would exist: “extended period.” That is, whether this process will continue for an extended period.
2010 Ron Paul 59:3
This, to me, demonstrates really the power and the control that a few people have over the entire economy. Virtually, the markets stand still and immediately after the announcement, billions of dollars can be shifted, some lost and some profits made.
2010 Ron Paul 59:4
It is a system that I think does not have anything to do with free market capitalism. It has to do with a managed economy and central economic planning. It is a form of price fixing. Interest rates fixed by the Federal Reserve is price fixing, and it should have no part of a free market economy. It is the creation of credit and causing people to make mistakes, and also it facilitates the deficits here.
2010 Ron Paul 59:5
Congress really does not want to challenge the Fed because they spend a lot. Without the Fed, interest rates would be very much higher.
2010 Ron Paul 59:6
To me, it is a threat to those of us who believe in personal liberty and limited government. Hardly does the process help the average person. Unemployment rates stay up at 20 percent. The little guy cannot get a loan. Yet, Wall Street is doing quite well.
2010 Ron Paul 59:7
Ultimately, with all its power, the Fed still is limited. It is limited by the marketplace, which can inflate like crazy. It can have financial bubbles. It can have housing bubbles. Eventually, the market says it is too big and it has to be corrected, but the mistakes have been made.
2010 Ron Paul 59:8
They come in and the market demands deflation. Of course, Congress and the Fed do everything conceivable to maintain these bubbles.
2010 Ron Paul 59:9
It is out of control. Once the change of attitude comes, when that inflated money supply decides to go into the market and prices are going up, once again the Fed will have difficulty handling that.
2010 Ron Paul 59:10
The inflationary expectations and the velocity of money are subjectively determined, and no matter how objective you are about money supply, conditions, and computers, you cannot predict that.
2010 Ron Paul 59:11
We do not know what tomorrow will bring or next year. All we know is that the engine is there, the machine is there, the high powered money is there, and of course, we will have to face up to that some day.
2010 Ron Paul 59:12
The monetary system is what breeds the risky behavior. That is what we are dealing with today. Today, we are going to be talking about how we regulate this risky behavior, but you cannot touch that unless we deal with the subject of how the risky behavior comes from easy money, easy credit, artificially low interest rates, and the established principle from 1913 on that the Federal Reserve is there to be the lender of last resort.
2010 Ron Paul 59:13
As long as the lender of last resort is there, all the regulations in the world will not touch it and solve that problem.
