Ron Paul says end the Federal Reserve.

Ron Paul thinks we should end the Federal Reserve. I agree with Ron Paul and in theory that would be nice, but who would the control the money supply? Would that be congress? I have a real problem believing that congress would be more responsible than the current irresponsible Federal Reserve Bank. I see a lot of really big problems with ending the Federal Reserve right now. It is not as simple as just doing away with the Federal Reserve. Not at a time when the entire world’s economy has become so dependent upon Federal Reserve to bail out there failing banks.

Few people know that at the begging of the bank collapse the Federal Reserve loaned $500 Billion to the World monetary fund to bail out the European banks. The whole world’s economy now is dependent upon the Federal Reserve Bank to keep the world’s banks and their economies from collapsing into oblivion. The second problem is if congress was to do away with the Federal Reserve at this point, it would only help to destroy confidence in the paper currency we now have to work with.

Ron Paul however is correct in all his statement and speeches, there is no one in congress that has the understanding of paper currencies that Ron Paul does. The Federal Reserve Bank is destroying the value of the dollar. The number one cause of inflation is a government just printing up money the way the Federal Reserve Bank is doing right now. Their actions will cost the American people dearly in the next two years. It takes one to two years for the inflation to show up when monetary policy is to dump trillions of dollars on the world markets. The inflation will start slowly at first and gradually grow and then mushroom into a horrific problem 2 years into the future. All economist even socialist economists know the results are a severely devalued currency. This is why Ron Paul gets so upset and shows such passion when he talks about the Federal Reserve and there loose monetary policies. He knows where this is going and it will destroy the country economically.

I will try to explain how it works and affects the average citizen. There are many problems that come with a severely devalued currency. Since the Federal Reserve and Bernanke decided to intentional inflate the currency we can expect at the least 40% devaluation. Let’s do the math on that. If you have $10,000.00 in the bank now the buying power is reduced to $6000.00. This means the Federal Reserve has stolen $4000.00 from you in the form of a devaluation of the currency. This alone has a multiplier of more money being needed to survive and being spent into the economy. It increases the amount of taxes being collected by the states and the federal government as taxes are charged by a percentage. The more money spent the more money the government collects. That may sound good for reducing the deficit and may seem on its face to reduce the federal budget deficit but the problem is everything the government does also cost more as well. So the deficit will go down for a very short period of time. The government expense eventually grows the same amount as the currency devaluation. It’s like the dog running in a circle chasing its tale, it never catches it. You can expect this devaluation by the end of 2011.

Now let’s look at the current total of the US economy and that’s 14.2 trillion a year in current dollars. If over the next 2 years the devaluation would be equal in its affect to the economy of the size of 40% devaluation and that would leave us with a 8.6 trillion economy down by 5.6 trillion in activity that would be devastating to the job market because the production necessary to provide for that adjusted dollar amount translates into about 40 million more jobs being lost. The end game is the economy in dollars will be larger than it is now but the amount of product need is greatly reduced due to the loss of buying power of the paper currency. There is no president for the trillions of dollars the Federal Reserve has just throughout into the world markets. There nothing even close. The current number on the world debt clock says $6.5 trillion for bail outs and the normal amount of money the Federal Reserve had on hand was about $800 Billion. That has been increased to 1.8 trillion. The 40% devaluation is modest and it could be 10 times that amount if the world and the public panics and that’s what I expect to happen.

Ron Paul understands this and more. He has been saying the Federal Reserve Bank is going to destroy the country. The next problem is there is only so much money in the people’s pockets and because it will cost 40% more to buy everything people can’t buy as much with their money. So the amount of products and services people can buy is reduced by a like kind amount of 40% of the currency devaluation. Even know the gross domestic product is growing the real economy will be shrinking. The result is the units of production the public can afford to buy are reduced and these results are fewer employees needed to provide the products or services. This results in a much higher employment rate then the current 9.7%. Every action has a reaction and these are the results.

Some people may say that there pays will increase because it’s in their contracts with their unions. Here are the many problems with that statement. Unions only make up about 12% of the work force. What about the other 88% of the population? The economy will still be severely affected by the currency devaluation regardless of whether you belong to a union or not. Then when is the last time union members got a 40% increase in pay? The more likely thing to happen due to the poor business atmosphere this currency devaluation will create is if you want to keep your job. Your union will negotiate your union wages down not up. The example is the automobile industry and that’s exactly what they had to do several times over the last 15 years. What I think will happen and only take the next two or three years not 15 years.

The extra taxes collected will make little difference in the federal deficit as the negative effects on the jobs market and the decline in the number of businesses paying taxes is reduced as many will go out of business and the jobs will just disappear. This will eventually offset the increased revenues collected in the beginning, revenues will be reduced in the longer term. There will be millions more on unemployment and welfare. The cost of government will grow as well in its normal operating cost so the deficit stays high and this further devalues the currency. This goes on until you get a hyper inflated currency and that leads to a collapse currency and economy. God bless Ron Paul he is warning the people and he’s right in everything he says. But there is no way the federal government is going to do what Ron Paul says. So what you can expect is exactly what he says is going to happen will happen. Ron Paul says the Federal Reserve is going to destroy the country He must be the only man in congress that really understands how fiat currency economies work. If we are going to change the future we must first imagine it.

Ron Paul