“They (central bankers) believe that flooding the world with money will somehow solve the very problems that such interventionism created in the first place.” Ron Paul, 2013
“As part of my efforts to understand the true root-causes of the financial crisis, I have read many books and articles including Ron Paul’s book ‘End the Fed’. Because of my experiences, the views expressed by Mr. Paul in this book resonated with me and I am working to learn more about this subject. Like Mr. Paul and many others, I do not believe it is possible for hundreds of millions of independent human interactions in a truly free and fair marketplace to cause a global financial and economic crisis. A global crisis requires central planning and coordination. It defies logic that independent, private bankers and other financial firms who compete with each other and/or operate in vastly different countries around the world, would coordinate their strategic and tactical business decisions unless directed to by government rules and regulations. Does it make any sense that nearly every major private bank in the developed world was ‘reckless’ and ‘greedy’ at the same time? It doesn’t to me. From all of my study and research, I believe that well-intended government intervention, including by central banks like our Federal Reserve, was the key factor in causing the global financial crisis. Ask yourself this simple question: Why if the Fed now has the power to save us from a second Great Depression (and re-inflate real estate, the stock market and other asset bubbles in the process), do they claim they had little to no power to cause one in the first place? That doesn’t make much sense, does it?” Mike Perry, former Chairman and Chief Executive Officer
Key Excerpts written by Ron Paul in the Forward to “The DAO of Capital”, 2013
“Before discovering the Austrian School (economists Mises, Nobel laureate Hayek, Rothbard, etc.), I did not fully understand the process of how free markets work. The Austrians illustrated for me the benefit of free market economies relative to interventionist, centrally planned economies. The more I read, the clearer it became to me that this was how truly free individuals living in a truly free society should interact with one another. Austrian economists were also arguing for free markets at a time when the majority of intellectuals were praising collectivism and socialism.
As economist Ralph Raico wrote:
‘Classical liberalism….which we shall call here simply liberalism….is based on the conception of civil society as, by and large, self-regulating when its members are free to act within very wide bounds of their individual rights. Among these, the rights to private property, including the freedom of contract and free disposition of one’s own labor, is given a very high priority….Austrian economics is the name given to the should….(that) has often been linked….both by adherents and opponents…to the liberal doctrine.’
I have always turned to Mises’s wise words whenever the world (and economics in particular) seemed most insane: ‘No one should expect any logical argument or any experience could shake the almost religious fervor for those who believe in salvation through spending and credit expansion.’ The core of the Austrian School is the unpredictability of human action and the enormous influence individual choice wields in how economics work. It recognizes the subjectivity of value, the role of the entrepreneur, and the pursuit of capital creation to advance society itself. These truths are as essential to grasp today, and perhaps more so, as they were when the school first emerged in the mid-nineteenth century.
As an adherent of the Austrian School, I have been frustrated by constantly being forced to watch what the centralizers and government planners have been doing to our economy….contriving recipe after recipe for disaster. We must understand that markets are naturally resilient.
Rather than calming the markets by their actions, central bankers create ever-mounting levels of distortion. Grasping at straws, they believe that flooding the world with money will somehow solve the very problems that such interventionism created in the first place.
People deserve better than this. Let capitalism function as it should without the manipulation of bureaucrats. As a doctor who practiced for a total of nearly 35 years, I abided by the “Hippocratic Oath” that charged me to do no harm and not get in the way of the body’s natural ability to heal itself. The government must do the same and allow market’s natural homeostatic process to work.
Our rights of free speech, assembly, religion, petition, and privacy remain essentially intact. But before our rights are lost, we must change the policies born of decades of government interventionism.
I have always believed deeply that the Founding Fathers got it right…certainly more so than their successors, who have worked feverishly against individual rights since the day our Constitution was ratified. Our nation was founded on the value of liberty, and I have never need to be convinced of the merits of individual freedom. Other forces challenged my natural instincts toward freedom…an education establishment, the media, and government. They constantly preached that we need government to protect us from virtually everything, including ourselves. But I never wavered in my conviction that only an unhampered market is consonant with individual liberty.
This liberty goes hand in hand with sound money, a concept that is fundamental to Austrian economics. Mainstream economists continue to downplay or dismiss its importance. The continual and never-ending bad results of these dominant economic ‘experts’ speak for themselves. Money, according to Mises, must originate in the market as a useful commodity in order for it to function properly. The most important role money plays is that of a medium of exchange. It also serves as a measurement and store of value. Unfortunately, politicians hold the conviction that money growth gives us economic growth. They are blind to the fact that government cannot create anything. Government cannot make man richer, but it can make him poorer. It is extremely naïve to think otherwise.
The Federal Reserve can intervene in the market and meddle with interest rates, but ultimately it cannot escape the immutable nature of free market economics. Politicians may warp a monetary system to their liking but they cannot repeal economic laws that determine the nature of money. As I have said in the past and stand by today, distortion and corruption through monopoly control can benefit the few at the expense of the many for long periods of time, but eventually the irrefutable laws of nature will win. Free choice in the market is the only way economic calculations can come about.
Money had always been viewed as neutral. The supply of money was not thought to play a critical part in determining specific prices. Rather, it was accepted as fact that the price of a product depended only on the supply and demand of the goods sold. This was tacitly accepted by even the early Austrian economists, but it took Mises to prove the nonneutrality of money. As he wrote in his masterful book, ‘Human Action’:
‘As money can never be neutral and stable in purchasing power, a government’s plan concerning the determination of the quantity can never be impartial and fair to all members of society. Whatever a government does in the pursuit of its aims to influence the height of purchasing power depends necessarily upon the ruler’s personal value judgments. It always furthers the interest of some groups of peoples at the expense of other groups. It never serves what is called the common wheel or the public welfare.’
To tamper with a nation’s money is to tamper with every economic aspect of people’s lives: earnings, savings, how much one pays in nominal terms for every purchase made. When money is manipulated at will by politicians, it always leads to chaos, unemployment, and political upheaval. For this reason it is imperative that we identify a money that cannot be a abused, that prohibits inflation, and allows responsible working citizens to prosper.
As “The Dao of Capital” clearly shows, with an inflating fiat currency, capital investment in a market economy becomes very difficult.
As money is destroyed, there is an increase in government power and interference in the markets to attempt to maintain order. Government officials throughout history have refused to admit that economic planning does not work until it’s too late. And then when government’s have tried to compensate for ‘printing too much money’ it has only made things worse. This should sound all too familiar to Americans concerning the functions of the Federal Reserve.
Ironically, there is a consensus in America against government price controls in favor of free markets, until it comes to the most important price of all…the price of time, or interest rates. This is how the government controls the value of money. Through this price control, the government distorts the market’s elaborate coordinating function between consumers and producers. Thanks to the work of the Austrian economists, we know that the loss of this coordination gives us boom and bust cycles….due solely to the manipulation of the supply of money and credit by the central bank. Therefore, the rate of unemployment and the general standard of living are all a reflection in large part of the monetary policy a nation pursues.
Mises understood how money becomes as much a political issue as and economic one. His insights helped me oppose excuses for deficits coming from both the left and the right. Regardless of their rhetoric, both factions depend on a fiat money system and inflation to continue government financing while serving their respective special interests.
The Austrians explained thoroughly why government intervention is the enemy and why individual liberty is the key to realizing true freedom.
The phrase ‘Austrian economics’ is not something I ever expected to come into widespread use. But since 2008, it has permeated our political vocabulary at a popular level….It has given me tremendous pride to see the thousands of young people who come to my rallies, a reflection of how the youth of America are embracing freedom, economic and otherwise.”