Patriot,

President Trump is flexing his muscles at the Federal Reserve. He is demanding Jerome Powell lower the interest rates.

If Powell pushes back, Trump might start attacking the autonomy of the Fed itself. He could start by calling for Congress to Audit the Fed!

As great as this might sound, we have to always stand by the right principles to get the right policies. As I explain in my latest column – read it below – neither Trump nor Powell should set the interest rate. The free market should.

The Fed should be audited, and ended, because it is fundamentally interfering with the free market. Whether it does that on behalf of privately-owned central banks, or the President and Congress, it is still a problem.

Read my column below, and if you support Campaign for Liberty’s mission to Audit and End the Fed – as well as to restore sound money and free markets – please support C4L with a contribution.

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For Liberty,

Ron Paul

<big><big>To Make America Great Again, Separate Money and State</big></big>

“Delivering Emergency Price Relief for American Families and Defeating the Cost-of-Living Crisis” is the title of one of the many executive orders President Trump issued in his first week back in the Oval Office. This executive order directs federal agencies to “deliver emergency price relief” to the American people by reducing federal regulations that increase the cost or limit the supply of healthcare, housing, energy, and other goods and services.

Repealing regulations is an effective way to reduce costs and increase supply in the affected industries. However, the price increases caused by regulations are sector specific. Economy-wide price increases are caused by the Federal Reserve.

Widespread price increases are the result of inflation. Inflation occurs when the central bank lowers interest rates by increasing the money supply.

In his remarks by video on Thursday before the World Economic Forum’s yearly meeting in Davos, Switzerland, President Trump said he would soon meet with Federal Reserve Chairman Jerome Powell to “demand” the Fed cut interest rates in order to help Americans cope with high prices. Pumping more money into the economy may give some consumers a temporary boost in purchasing power, but a long-term effect of the cut will be further erosion of most Americans’ standard of living as the influx of new money causes the dollar to lose value.

The short-term benefits of any increase of the money supply and reduction in interest rates are mostly felt by the well-off since they receive the new money before other Americans. So they enjoy increased purchasing power before the Fed’s inflationary policies cause prices to rise.

Interest rates are the price of money. As with all prices, interest rates inform market actors about market conditions. When the central bank manipulates the interest rates, it distorts the signals sent to market actors, causing misallocation of resources. The result is a “bubble” that produces a short-term boost in employment and incomes. However, the bubble will eventually burst, causing a recession. Just as middle- and lower-income Americans suffer most from the Federal Reserve-caused price increases, they are the primary victims of the Federal Reserve-caused recession.

The best thing Congress and the Federal Reserve can do when a bubble bursts is let the recession run its course. Recessions are necessary to remove the distortions caused by the Federal Reserve’s easy money policies. Of course, Congress and the Federal Reserve refuse to take the sensible, though politically difficult, path. Instead, they set the stage for the next bubble via “stimulus” spending and low interest rates.

President Trump claims he knows more about interest rates than does Federal Reserve Chair Jerome Powell. Whether or not President Trump’s experience in real estate development (a business that is very sensitive to changes in interest rates) makes him more of an expert on interest rates than Chairman Powell is beside the point. No politician, bureaucrat, or central banker can know the correct interest rate. The only way to know the correct rate is to allow individuals acting in a free market to set the interest rate.

Despite his misunderstanding of monetary policy, President Trump deserves credit for publicly criticizing the Federal Reserve. President Trump should follow through on his critiques of the Fed by working with Congress to pass the Audit the Fed bill and legislation allowing people to use alternatives like precious metals and cryptocurrencies.

Restoring a free market in money is key to fulfilling President Trump’s inaugural pledge to bring about a new golden age.

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The mission of Campaign for Liberty is to promote and defend the great American principles of individual liberty, constitutional government, sound money, free markets, and a constitutional foreign policy, by means of education, issue advocacy, and grassroots mobilization.

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Campaign for Liberty
PO Box 104
Lake Jackson, TX 77566

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