Ron Paul Is Right To Criticize the Fed

Congressman Ron Paul

I have criticized a number of politicians and other members of the ruling class for not understanding what got us into our current economic mess and, consequently, for not knowing how to get us out of it. Readers of this blog will remember my criticisms of Ben Bernanke's monetary policy and President Obama's fiscal stimulus plan. I have also criticized the previous Bush Administration for setting the stimulus body in motion, for starting the commotion.

In yesterday's Wall Street Journal, however, there is an op-ed from Congressman Ron Paul. He is the lone presidential candidate who surely gets it right. The Fed is to blame for the financial crisis. Paul gets it right because he uses the best economic framework when analyzing economic policy. Citing Ludwig von Mises and F. A. Hayek, he draws on Austrian, causal-realist economics to explain how and why business cycles occur:

The great contribution of the Austrian school of economics to economic theory was in its description of this business cycle: the process of booms and busts, and their origins in monetary intervention by the government in cooperation with the banking system. Yet policy makers at the Federal Reserve still fail to understand the causes of our most recent financial crisis. So they find themselves unable to come up with an adequate solution.

Because Paul rightly sees our central money printing organization as the chief economic culprit, he also rightly calls for abolishing this important tool of the leviathan state. He concludes his essay by noting that giving a central bank monopoly over our monetary system is the antithesis of liberty:

What exactly the Fed will do is anyone's guess, and it is no surprise that markets continue to founder as anticipation mounts. If the Fed would stop intervening and distorting the market, and would allow the functioning of a truly free market that deals with profit and loss, our economy could recover. The continued existence of an organization that can create trillions of dollars out of thin air to purchase financial assets and prop up a fundamentally insolvent banking system is a black mark on an economy that professes to be free.

No other economic candidate even comes close to Paul's understanding of economic theory and policy.