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.