WHAT I THINK.....CHARLES SCALIGER

“The entire federal government,” laments Congressman Ron Paul in his newest book, End the Fed, “is one giant toxic asset at the moment. It certainly has no business telling the private sector how to run its affairs. It is in worse financial shape than all the companies in the private sector put together.”

Hard words, but Congressman Paul knows whereof he speaks. It was Ron Paul, unique among congressmen for his understanding of how a free-market economy is supposed to work, who warned repeatedly of the coming economic calamity. It was Ron Paul, too, who warned both the Bush and Obama administrations that attempts by the government to bail out failing corporations with taxpayer dollars and passing massive stimulus packages would only make things worse. And it has been Ron Paul who has warned of disastrous long-term consequences of the inflationary activities of the Ben Bernanke–led Federal Reserve.

Congressman Paul’s concerns about the Federal Reserve are nothing new. The gynecologist-turned-eleven-term congressman from Texas has spent a long political career promoting liberty and limited constitutional government as the American Founders understood them and exposing the mischief at the Federal Reserve. With the unexpected success of his presidential campaign and his recent best-selling manifesto on liberty, Dr. Paul’s uncompromising, consistent, and thoroughly principled stances on limited, constitutionally legitimate government are well known around the world. Now, thanks to End the Fed, his views on paper money, fractional-reserve banking, and the Federal Reserve and its manipulation of the money supply are summarized for a mass readership. Under a single cover and on just 212 readable pages are assembled philosophical, economic, and constitutional arguments for abolishing the Federal Reserve, a succinct history of banking, and a number of fascinating recollections and snippets of telling dialogue between Dr. Paul and various chairmen of the Fed as far back as Paul Volcker.

Finances and Freedoms

For Dr. Paul, an understanding of economics and finance is absolutely crucial to understanding liberty fully; one cannot embrace liberty while rejecting free-market economics in any degree. Yet it has become characteristic of many on the right – otherwise eloquent partisans of liberty and free-market economics, like the late Milton Friedman – to set aside certain free-market principles where money and banking are concerned. Laissez faire for factories, mines, retailers, and agriculture, indeed, say apologists for the Fed, but for banking, money, and finance, we must have regulation, currency manipulation, the fixing of interest rates, and other characteristics of a command economy.

Unfortunately, many people have allowed themselves to be persuaded that economics, banking, and finance are numinous, abstract disciplines best left to the experts. But we ignore these topics to our considerable detriment. Dr. Paul writes: “Everyone should have an intense interest in what money is and how it’s manipulated by the few at the expense of the many. Money is crucial for survival. It is necessary for maintaining a free society. A healthy economy depends on it. Limiting political power is impossible without it. Sound money is essential for preventing unnecessary wars. Prosperity and peace in the long run are impossible without it. To understand money, one absolutely must understand what a central bank is all about.”

America’s central bank, the Federal Reserve or “Fed,” was established in 1913, and according to Dr. Paul, has been complicit in – indeed, has been the driving engine for – the supersizing of the federal government that has transformed America since the First World War, and not for the better. This is because the Federal Reserve, with its ability to artificially increase the money supply (especially after the gold standard was abandoned), has largely emancipated Washington decision makers from the risky politics of raising revenue via direct taxation.

Heavy, direct taxation we certainly have, but the income tax and other federal taxes, obnoxious though they are, pale beside the Fed’s ability to raise money for the federal government simply by printing it (or, which amounts to the same thing, making a computer entry). Only thus has the federal government been able to finance hugely unpopular projects, like international wars, that Americans would never consent to if the monies were extracted up front via direct taxation. Thanks to the inflationary magic of so-called fiat money, the Federal Reserve (and other central banks like it around the world) can print money as needed, and the bill will come later, in the form of reduced purchasing power resulting from inflation. Inflation, by the way, is also a kind of tax, but one so subtly (and dishonestly) administered that few are able to diagnose its origin.