The Federal Reserve completed its two-day policy meeting last week. To no one’s surprise, Fed Chairman Ben Bernanke announced that nothing would change: $85 billion in monthly purchases, low interest rates and stimulus would all remain the same.
Retired Texas Republican Congressman Ron Paul published an op-ed piece on The Free Foundation – his weekly columns will be published there until his personal webpage is up – titled “Federal Reserve Blows More Bubblese.” He noted that no one is upset about quantitative easing part III because there is no gigantic price tag upfront, but at the end of the year the balance sheet might hit as much as $4 trillion.
“With no recovery in sight, where’s all this money going? It is creating bubbles. Bubbles in the housing sector, the stock market, and government debt,” Dr. Paul wrote. “The national debt is fast approaching $17 trillion, with the Fed monetizing most of the newly issued debt. The stock market has been hitting record highs for the past two months as investors seek to capitalize on the Fed’s easy money. After all, as long as the Fed keeps the spigot open, nominal profits are there for the taking. But this is a house of cards. Eventually, just like in 2008-2009, the market will discipline the bad actions of the Fed and seek to find the real normal.”
According to Paul, it’s disappointing but not surprising that the American people will have to deal with the same failed policies. In the end, Paul believes the real solution to this economic collapse is to let the free markets work.
“Allow entrepreneurs the chance to create instead of stifling innovation with arbitrary regulations. Allow interest rates to rise to equal the risks in the economy. Allow bad debts to be liquidated so we can build on a firm foundation. Stop printing money to benefit the government and big banks. Restore sound money to the economy and the American people. Sound money is the bedrock for prosperity and the best check on big government and crony capitalism.”