Ron Paul Asks Ben Bernanke: Where is the Moral Justification?

Last week, before the House Committee on Financial Services, Ron Paul pointedly asked Fed Chairman Ben Bernanke: “What moral justification do we have to deliberately devalue the currency and the dollars that people save?”

At this hearing, Paul explained why the beneficiaries of the Fed’s cut in interest rates are financial institutions and Wall Street. The victims, Paul added, are the poor, the middle class, and the future of the U.S. economy.

Dr. Paul has been a student of economics for many years and, in particular, has studied the theories of Ludwig von Mises and Nobel laureate Friedrich Hayek. Both economists have repeatedly explained how Fed credit expansion creates distorted saving and investment signals. These distorted signals lead to malinvestment. The consequences of malinvestment are recession or depression.

When the Fed chooses to mask the consequences of their past folly through more credit expansion, even more malinvestment is created. The end result of this is an even larger economic decline. Paul seems to be the lone political voice in Washington who understands this.

Paul’s question to Bernanke may be watched below.


10 Responses to Ron Paul Asks Ben Bernanke: Where is the Moral Justification?

  1. Dr. Paul has great big brass ones, and more integrity than all the rest of Washington combined. He rocks!

    You won’t hear ANY of the other candidates talking about doing away with the Fed or the Income Tax, they’re all bought and paid for.

  2. Velvet says:

    You’re dead on, once again. These guys are positively ridiculous. I just got out of Europe in time – paying $1.34 – $1.36 for the Euro. Now I think it’s closer to $1.48. And we’re on par with Canada for the first time in 20-something years? Ugh.

  3. Thanks Velvet. When the average American, who is already squeezed, begins to see the price of imported goods rise, their enthusiasm for Bernanke’s cuts is sure to waver.

  4. JOHN HOWARD says:

    There is a related issue that most people appear not to understand – that inflation benefits the “early spenders” to the disadvantage of the “late spenders”. The very first spenders are the bankers and politicians. They grow rich (or powerful) spending and lending-for-profit the newly counterfeited paper money, which then drives up prices as inflation gradually flows out across the economy. Late spenders then face the higher prices later on.

    Politicians and bankers are behind this greatest-of-all scams – massive counterfeiting which cheats the powerless for the benefit of the powerful… I’ll be voting for Ron Paul – at the ballot box and with my wallet. Hope you all do to.

  5. Richard,

    The source of Ron Paul’s courage lies in his principle-centered leadership. When we draw on principles, we draw from a deep well indeed.

    What Paul is challenging Bernanke to do is to lay out the principle that allows the Fed to bailout the few at the expense of everyone else.

    Currently Bernanke is being lionized in the press for his “brave” move in cutting rates. History will judge the Fed’s move to be cowardly and guided by political expediency rather than principles.


    “Early spenders” do indeed get the advantage and the “early spenders” are not average Americans. Instead they are those who have first access to increases in liquidity that the Fed provides.

  6. MAX says:

    What do you mean by early spenders being “those who have first access to increases in liquididty..” who are these people tha twe need to unmask?

  7. Max,

    There is not too much to unmask here. When the Fed increases the supply of money it is not distributed evenly throughout the economy. In August, for example, the Fed injected $38 billion into the banking system. In an unusual move the Fed allowed banks to borrow this money temporarily with sub-prime mortgage-backed securities as collateral.

    Increases in the supply of money are also partially in response to the government running deficits. Thus look to where government spending is expanding to see where liquidity flows first; currently defense contractors, ethanol producers etc.

  8. JOHN HOWARD says:

    The key to any great scam is vocabulary. As Lenin advised, “First, confuse the vocabulary”. Injecting liquidity, making credit available, loosening, accomodative monetary policy, economic stimulation, are all euphemisms for counterfeiting.

    For those interested in understanding the Federal Reserve System from Ron Paul’s perspective, beside his own many articles and his comments to FED chiefs during many hearings, I highly recommend the following (all free online) from the late great Murray Rothbard, who, like Ron Paul, was an economist of the “Austrian” school of economics:

    Google these titles with Murray’s name:

    What has Government Done to Our Money?
    Fractional Reserve Banking
    The Trouble With Milton Friedman
    The Central Crime of the Central Bank
    The Case for the 100% Gold Dollar
    Anatomy of a Bank Run

  9. Ben Mason says:

    I though you might like to see my comments on my blog about the recent complaint of the devaluing of the money supply.

  10. Ben,

    Good luck with your new blog. It looks very interesting.

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