Dr. Ron Paul and the Case of the Zombie Dollar

By: Jared M. Grifoni, Esq.

That the dollar is dead shouldn’t come as a surprise to anyone. The dollar is a shell of its former self having lost 95% of its value since 1913 and having lost almost 50% of its value in the past three years alone. While having been dead for a long time many have failed to notice the distinction between today’s zombie dollar and the hard money dollar that existed prior to the creation of the Federal Reserve in 1913. In the meantime to avoid a systemic collapse brought up by the complete fall of the dollar, the Federal Reserve has had to electroshock the dollar back to life like its own version of Frankenstein’s Monster.

We are all aware of the terrible state our economy has been in for some time due to devastating levels of debt, malinvestment, and overextension by the Federal Government. The perfect storm of government intervention, fiat currency, and toxic debt came to a head in 2007/2008. Rather than to let the free market correct those problems by rooting out bad investments, allowing it to set the interest rates based on market conditions, rolling back overspending, and returning the dollar to its original hard money backed state the Federal Reserve doubled down (and tripled down) on their failed policies like setting interest rates artificially low, TARP, and the assorted bailouts to “Too big to fail” companies.

When the intervention of those programs failed to show any type of improvement in the U.S. economy the Fed continued to ramp up its market interventions with the quantitative easing programs. Quantitative easing occurs when a central bank begins purchasing financial assets from banks and other businesses with new, electronically created money. Keep in mind this fiat money has no value beyond the “full faith and credit of the United States” and its relative scarcity rather than being backed by a physical commodity like gold. Again, when the first round of quantitative easing failed to show any true market improvement the Fed decided to ramp up its activities with a second round of money printing, I mean quantitative easing, now commonly referred to as “QE2.” As you would expect when more money is created out of thin air you will see an inflationary effect and true to course true inflation has increased by about 9% a year. I say “true” inflation because the methodology by which the Federal government calculates inflation has been changed in order to show a much lower figure. The effect of inflation from the quantitative easing programs even caused the Fed to suggest that there would not be any additional rounds of easing after the current QE2 expired in June of this year.

Despite the “promises” of the Fed to lay off a potential QE3 Chairman Ben Bernanke told Congress today that a new stimulus program is in the works which will of course entail additional asset purchases and that the Fed could also cut the interest paid to banks. Once news of Bernanke’s comments reached the market the dollar crashed and continued on its way to its worst showing against a basket of currencies in almost a month as well as fell to a record low against the Swiss franc. Put this news against the backdrop of the economy adding roughly 18,000 jobs last month, the lowest total in almost a year and consider that the economy needs to add 125,000 jobs per month to keep up with population growth and at least twice that to bring down the unemployment rate. After hearing the news himself, libertarian-leaning Ron Paul stated,

QE3 here we come. And gold is responding, shooting way up near all-time highs. Of course I predicted this. Bernanke will destroy the dollar unless he is stopped.”

Dr. Paul, the author of End the Fed published in 2010, is no Johnny-come-lately to the anti-Fed movement, Dr. Paul IS the anti-Fed movement. In February of 2009, Dr. Paul introduced the The Federal Reserve Board Abolition Act, H.R. 833 by stating,

From the Great Depression, to the stagflation of the seventies, to the current economic crisis caused by the housing bubble, every economic downturn suffered by this country over the past century can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial “boom” followed by a recession or depression when the Fed-created bubble bursts.

Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of special interests and their own appetite for big government.

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy”

Dr. Paul has been the only voice of reason in Washington, D.C. when it comes to monetary policy (as well as individual liberties, foreign policy, and beyond) since he first arrived there in 1976 having won a special election to fill an empty seat. That is why the news yesterday that “Dr. No” after having served twelve terms was going to be giving up his Congressional seat at the end of his term in 2012 but that in doing so he was going to be focusing even more so on his bid to win the presidency was so bittersweet. An energized Dr. Paul, focused on winning the White House without his future congressional role being held hostage by the party bosses may be the best recipe yet for an astounding run in 2012. At the very least, we can expect (and hope) that this leads to a take-no-prisoners attitude in the upcoming debates and media interviews after he was openly laughed during the 2008 debates by the likes of Rudy Giuliani and Mitt Romney and mocked by the debate “moderator” Carl Cameron.

As a nation we are facing a set of very dire circumstances. We liberty minded individuals need more people as courageous as Ron Paul to stand up to the Federal Reserve, excessive government spending, and violations of our inalienable rights. Dr. Paul is 100% correct when he states that unless he is stopped, Ben Bernanke is going to kill the dollar once and for all. Only this time there will be no more lightning bolts out of the sky to jolt the dollar back to life.