Patriot,

Inflation is at the highest levels it's been
in 40 years, when Jimmy Carter was in the White House and the
economy was ruled by "stagflation."

While there are still a few fiscal hawks on
the right side of the aisle, spending drastically increased when
Republicans controlled the executive and legislative branches
just a few short years ago.

Now that the Democrats control the White
House, House, and Senate, it's gone into overdrive -- but not
without the help of a few on the right who had to vote for the
latest "bipartisan compromise," the $1.2 Trillion
spending bill. Without their help, it would not have passed.

I've always said when something is
"bipartisan," chances are the American people are
getting the short end of the stick.

Of course, none of the out-of-control
spending would be possible without the Federal Reserve there to
backstop it all.

My column this week focuses on how both sides
of the aisle collude to spend the American public into historic
deficits and now massive inflation that is hitting at the worst
possible time.

-Ron






Federal Reserve Failure!

What do the Federal Reserve and
neoconservatives have in common? They both refuse to admit that
their policies - the neocons' promotion of perpetual war and the
Fed's manipulation of the money supply - are complete failures,
having produced the opposite of the promised results.

The latest example of the Federal Reserve
engaging in Bill Kristol-like levels of denial is the Fed's
continued insistence that the return of 70s-style inflation is a
"transitory" phenomenon resulting from the end of the
lockdowns. The Fed has acknowledged the "transitory"
inflation will last until at least 2022, yet it is still
determined to keep interest rates at or near zero until the
"jobs situation" improves.

To be fair, the Fed has finally announced
plans to cut back on its money-pumping activities by reducing by
15 billion dollars a month its monthly purchase of 80 billion
dollars of Treasury bonds and 40 billion dollars of
mortgage-backed assets.

It is unlikely that the Fed will stick to its
plans to "taper" its purchase of Treasury bonds. The
Fed's Treasury bond purchases enable the federal government to
run up the debt without increasing taxes or paying punishingly
high interest on the debt.

The Congressional Budget Office projects that
by 2030 the federal debt interest cost will more than double to
829 billion dollars. That is more than the government spent on
the military in 2020!

Despite the looming fiscal crisis, Congress
is unlikely to cut spending anytime soon. Instead, Congress
members are debating a 1.75 trillion dollars "social
spending" plan, having just passed a 1.2 trillion dollars
infrastructure bill. Contrary to the claims of President Biden
and his allies, this new spending will not reduce inflation. What
it will do is hasten and deepen the inevitable economic crisis
caused by government overspending.

Of course, most Republicans will continue
opposing big increases in spending and debt ... as long as a
Democrat sits in the Oval Office. A Republican who becomes
president will likely believe, as Dick Cheney has said, that
President Reagan taught us that deficits don't matter. The
difference between the parties is Republicans are less likely to
raise taxes. So, no matter who controls Congress and the
presidency, spending and debt can keep increasing.

The Fed may also take dramatic action to keep
interest rates low if other purchasers of federal debt demand
higher interest rates in anticipation of future inflation. Such a
situation would be a sign of what Ludwig von Mises called a
crack-up boom. A crack-up boom occurs when the public anticipates
continuing devaluation of the currency, causing them to factor
future price increases into their economic plans.

Crack-up booms are preceded or accompanied by
economic crises that can lead to the rise of authoritarianism.
However, this is not inevitable. Important steps can be taken
including cutting spending on militarism and corporate welfare,
phasing out the entitlement and welfare programs, and auditing
and ending the Fed. Those of us who know the truth should seek to
convince our fellow citizens of the importance of restoring a
limited, constitutional government that does not try to run the
economy, run the world, or run our lives.

For Liberty,

Ron Paul
Chairman



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