Ron Paul and the Free Market Boom Bust Economy Without the Big Brother Baby Sitting

May 14, 2011 by

The Federal Reserve Bank should be owned by the people/government. Outside of questions of its ownership, however, the country does need a central bank to institute a counter-cyclic economic stabilization policy. Look at the case of the economic collapse of the South, when cotton was in high demand. Those who went into cotton farming at the beginning made a killing. This prompted everyone and his brother to plant cotton. The cotton rapidly filled all the warehouses until they had all they could sell for many years, and then everybody was out of a job, leading not to simple failure but catastrophic failure of entire regions. A central bank makes venture capital more available when it is clearly time for business to charge, and can choke off the flow when there’s too much investment in new business, and keep it at a stable rate when there is slow, steady growth. History has shown that in the long run, our economy grows more with sustained slow growth than when enduring the damage of the bust part of the boom-bust cycle. Your extremist, Libertarian free marketeer wants the opposite policy, no control, which was the recipe not only for the cotton crash but for the housing crash we’re still dealing with today. Trust in the market, he says, and we can trust the market. We can trust it to produce a boom-bust economy, which is really just a Ponzi scheme, because only the most connected on the ground floor will make it big, and the rest of us are hurt much more than they gain.

To a certain extent, Ron Paul’s criticism of the Fed has merit, because the policy has often been wrong, but it’s important to keep in mind that America had a boom-bust economy worse than that of today before there was central manipulation of the currency. The gold standard is voodoo, as well because the value of gold is largely arbitrary and fluctuates with the economy just like paper. To my mind, it is better to have a ship with a rudder and an dullard at the wheel than a ship with no rudder at all. This latest boom-bust cycle had much more to do with deregulation of the financial markets than sinister interference from the Fed.

For another ship metaphor, the free market without Big Brother babysitting is like a long boat, and when somebody catches a fish on one end, everyone runs down there to cast their lines, but then the stern dips under the waves, and the boat starts taking on water, so everybody panics and runs to the bow. Then the bow goes under the waves, and the boat takes on more water, until everyone is fighting to the death over pieces of flotsam and jetsam to hang onto.

When Ron Paul attacks the ownership of the Fed, which is an issue I can support, also keep in mind that he is hostile to the idea of the government controlling the economy at all, which is an idea I can’t support. It makes sense when kept out of the real world and within the ideology of the current strain of Libertarianism, but a complex and sophisticated economy requires many organs the same way as a complex and sophisticated being like a human one does. We have gotten used to a sophisticated economy, and would not be happy with an amoeba where once there was something much more useful and productive. True, when things get complex, things start to break down, but I think we just need some medicine and are not ready to just die yet and let the microbes consume what’s left of us.

Ah, but Ron Paul is against medicine for most of us, too. I hope Kucinich runs again.

Rex Rose

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