Among my many weaknesses, understanding the Federal Reserve and what it does has always been quite high on my list! But this article on Minyanville detailing Ron Paul’s questioning of Ben Bernanke yesterday, the video is posted above, really illuminates to me how the Reserve’s actions may effect our everyday lives, and not just when we’re trying to buy a house, etc. Paul asks Bernanke what moral justification is for putting the middle class and poor thru a cycle of increasing prices and a weakening dollar for the benefit of Wall Street, through the Federal Reserve’s continous lowering of interest rates and injection of currency into the system. Paul argues that this artificial lowering of interest rates create an artificial rise in ‘overinvestment and malinvestment’. Meanwhile, the constant injection of new currency lowers the value of the dollar, leading to an increase in prices and the cost of living.
It makes a lot of sense to me, and I think it was telling that Bernanke’s answer was pretty muted, only saying that the Fed considers inflation very important and not addressing not only Paul’s question of the moral justification, but not even addressing the Paul’s argument that the lowering of interest rates and injection of money into the system leads to increased prices, a lower dollar, etc. Now I know Bernanke has to be, as part of his job description, one of the most muted men in America. If Alan Greenspan sneezed, it seemed the market would drop a percent. But it does seem telling that he disputed very little of what Paul said.
Knowing as little as I do about the Fed, I don’t know if Paul is right on or perhaps missing something. But he sure sounds spot on, his arguments are very common sense, and I find it disconcerting that he seems to be just about the only candidate talking about this issue, considering the major effect it sounds like it can have on all of our lives.