Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Ron Paul: The Fed Is Getting Desperate

  by    0   5

Peter Schiff has called the Federal Reserve’s response to the economic meltdown “a monetary hail mary.” The central bank has printed trillions of dollars out of thin air through QE infinity, taking the Great Recession quantitative easing programs and putting them on steroids. And the Fed has gone beyond the “standard” extraordinary policy of the 2008 crisis, plunging its hands into the corporate bond market.

Peter has argued that none of this is actually helping the economy. In fact, it’s hurting, furthering distorting an already over-leveraged economy.

In an article published at the Ron Paul Institute for Peace a Prosperity, Ron Paul writes that all of this just goes to show the Fed is getting desperate.

The opinions expressed in the following are those of Ron Paul and do not necessarily reflect the views of Peter Schiff or SchiffGold

In a sign that the Federal Reserve is growing increasingly desperate to jump-start the economy, the Fed’s Secondary Market Credit Facility has begun purchasing individual corporate bonds. The Secondary Market Credit Facility was created by Congress as part of a coronavirus stimulus bill to purchase as much as 750 billion dollars of corporate credit. Until last week, the Secondary Market Credit Facility had limited its purchases to exchange-traded funds, which are bundled groups of stocks or bonds.

The bond purchasing initiative, like all Fed initiatives, will fail to produce long-term prosperity. These purchases distort the economy by increasing the money supply and thus lowering interest rates, which are the price of money. In this case, the Fed’s purchase of individual corporate bonds enables select corporations to pursue projects for which they could not otherwise have obtained funding. This distorts signals sent by the market, making these companies seem like better investments than they actually are and thus allowing these companies to attract more private investment. This will cause these companies to experience a Fed-created bubble. Like all Fed-created bubbles, the corporate bond bubble will eventually burst, causing businesses to collapse, investors to lose their money (unless they receive a government bailout), and workers to lose their jobs.

Under the law creating the lending facilities, the Fed does not have to reveal the purchases made by the new facilities. Instead of allowing the Fed to hide this information, Congress should immediately pass the Audit the Fed bill so people can know whether a company is flush with cash because private investors determined it is a sound investment or because the Fed chose to “invest” in its bonds.

The Fed could, and likely will, use this bond-buying program to advance political goals. The Fed could fulfill Chairman Jerome Powell’s stated desire to do something about climate change by supporting “green energy” companies. The Fed could also use its power to reward businesses that, for example, support politically correct causes, refuse to sell guns, require their employees and customers to wear masks, or promote unquestioning obedience to the warfare state.

Another of the new lending facilities is charged with purchasing the bonds of cash-strapped state and local governments. This could allow the Fed to influence the policies of these governments. It is not wise to reward spendthrift politicians with a federal bailout — whether through Congress or through the Fed.

With lending facilities providing to the Federal Reserve the ability to give money directly to businesses and governments, the Fed is now just one step away from implementing Ben Bernanke’s infamous suggestion that, if all else fails, the Fed can drop money from a helicopter. These interventions will not save the economy. Instead, they will make the inevitable crash more painful. The next crash can bring about the end of the fiat monetary system. The question is not if the current monetary system ends, but when. The only way Congress can avoid the Fed causing another great depression is to begin transitioning to a free-market monetary system by auditing, then ending, the Fed.

Copyright © 2020 by RonPaul Institute. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given.

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Bailout Nation: Moral Hazard and Low Economic Growth

Bailouts are the name of the game right now. It seems like everybody is in line for a bailout. Airlines. Movie theaters. Small businesses. Hospitals. Not to mention the fact that the Federal Reserve has resorted to directly buying corporate debt. Conventional wisdom tells us this is necessary. After all, the government shutdown put tremendous […]

READ MORE →

Coronavirus Put the “War on Cash” Into Hyperdrive

Last month we reported that the Chinese government has launched a pilot program for a digital version of the yuan. The virtual currency ups the ante in the war on cash and creates the potential for the government to track and even control consumer spending. China isn’t alone in using COVID-19 as an excuse to […]

READ MORE →

(Un)Happy Deficit Day

On June 9, the national debt surged above $26 trillion. Just over one month before that, the debt eclipsed $25 trillion. And 28 days before that, the national debt stood at a mere $24 million. May’s budget shortfall came in at a staggering $398.8 billion, pushing the fiscal 2020 deficit to $1.88 trillion And there […]

READ MORE →

The Fed Gone Wild

Peter Schiff has called it a “monetary Hail Mary,” but virtually nobody in the mainstream questions the wisdom of the Federal Reserve unprecedented response to the economic impacts of the coronavirus pandemic. And it truly is unprecedented. It’s not just zero percent interest rates and QE infinity. The Fed is buying everything but the kitchen […]

READ MORE →

Curing COVID-19 Won’t Cure the Economy

We have been making the case for weeks that we aren’t heading for a quick recovery. We’ve reported on the number of people of small business owners who don’t think they’ll survive, the increasing number of over-leveraged zombie companies, and the tsunami of defaults and bankruptcies on the horizon. Yes, we have seen some economic […]

READ MORE →

Comments are closed.

Call Now