The Ron Paul Economy

The Ron Paul Economy

OK, three-quarters of what he says is wacky. But his view of the Fed’s contribution to rampant inflation is right on the money.


The little man who wasn’t there at the Republican TV debates is Ron Paul, the short-of-stature libertarian physician and Congressman. The debate moderators, who are threatening to become the ruin of electoral politics in the United States, almost never turn to ask Paul a question–that is, when he is allowed in the hall to participate.

On the occasions when they do toss a question Paul’s way, they seem not to listen when he answers. And when he’s finished, they turn away as if he hadn’t said anything. Granted, libertarianism is a little outré and can sound as if it is close to anarchism. But there are times when Congressman Paul says things that are worth listening to.

He is the only candidate who brings up what is happening to our money, which is another way of saying that he is worried about why the cost of buying groceries is going through the roof. While the other presidential contenders are silent on the topic, Paul reminds us that “government officials consistently claimed that inflation is in check at barely 2 percent, but middle-class Americans know that their purchasing power–especially when it comes to housing, energy, medical care, and school tuition–is shrinking much faster than 2 percent each year.”

Paul is the contender who seems to understand that the Federal Reserve Board is not the Vatican and that its chairman, Ben Bernanke, is not the pope. It’s a fixed practice by our politicians to treat whoever is the chairman of the Fed as though he were endowed with infallible powers.

On Wall Street, the sharper ones know better. They understand that lowering interest rates every time the stock market swoons will eventually, or even a lot sooner, bring a world of pain down on us. As it is, thanks to the Fed, interest rates are lower than the rate of inflation. This anomalous condition is called “negative interest,” and for savers it means that their money is disappearing even as it rests safely tucked away in certificates of deposit.

For people who understand that their money is evaporating in front of their eyes there is a mighty incentive to rush out to the mall while that money is still worth something. For the moment a stampede to the stores by inflation-spooked people may please the economic pooh-bahs because current theory has it that people will buy lots of stuff, which in turn will create lots of jobs. But after they’ve spent their retirement money, then what?

Then people can spend their economic stimulus money. Left undiscussed is how the government is going to get the money it plans to hand out to anybody who has a pulse. Maybe Uncle Sam can borrow it from the Chinese or the Arabs–although both groups are losing enthusiasm for making loans to be paid back in ever-shrinking dollars.

Neither the Europeans nor the Brits with their higher interest rate euros and pounds will have much interest in investing in lower-rate dollars. There don’t seem to be many people left we can con into bailing us out of a mistake we repeatedly make.

The Federal Reserve Board can print the money, which is exactly what Ron Paul is afraid of. The more it prints, the less it’s worth. The US suffered through years of high inflation in the 1970s and, from the standpoint of personal income, has never completely recovered.

If he could, Ron Paul would abolish three-quarters of the government, which works out to meaning that about three-quarters of what Ron Paul says falls into the “impractical dreamer” category. That leaves one-quarter–but that fraction of his agenda is, no pun intended, on the money.

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