The Federal Reserve is still in quantitative-easing mode, according to congressman and Republican presidential candidate and Ron Paul, despite the fact that it announced Wednesday it would hold off any new actions to aid the economy.
“In a way I think they’re still in QE, because [Ben Bernanke] guaranteed interest rates were going to stay about 0 percent for the next couple years,” Paul told me last night on The Kudlow Report.
And if tax rates don’t go down and spending isn’t cut, he added, all the quantitative easings in the world won’t solve our problems and “will eventually destroy our currency.”
The Fed on Wednesday left interest rates unchanged, cut its growth forecasts, and said it expects the unemployment rate to remain largely the same. It also left the door open to taking further actions to aid the economy in the future.
But according to Paul, Bernanke is doing exactly the opposite of what he should be doing.
“For him to do what I want him to do, he would have to admit his whole career was misdirected,” Paul said. Bernanke would have to acknowledge that his theories were wrong, according to Paul, who added that “all this QE stuff doesn’t work.”
The congressman from Texas is a long-time critic of the Federal Reserve and Bernanke, and his view didn’t change after watching the chairman’s latestpost-Fed-meeting news conference.
In that press conference, Bernanke defended the central bank’s record on keeping inflation low and said the Fed may look to reinvest in mortgage-backed securities to provide additional support for the weak housing market. But Paul believes buying more bonds just exacerbates the problem.
“I see no benefit from this whatsoever,” he said. “I think we don’t get the correction that we need. We need some of that debt liquidated. We need some of that mal-investment taken care of. We need prices to go down.”
And Bernanke is wrong about inflation not being a problem, he said. It’s here and it started with the increase of the money supply.
“There’s a lot of factors that go into pushing prices up,” he said. “We know that the stimulus has been put out there, and all we need to do is have a multiplier effect and this thing could get way out of control. And eventually I think that’s what’s going to happen.”
Paul said his ultimate goal is to diminish the power of the Fed to monetize debt. His pick for chairman if he’s elected president? Economist Jim Grant.
“I think he’s capable because he is a free-market person,” said Paul. “He understands sound money, and I think if he had to work within the system, he would be able to restrain the Fed money machine as much as anybody else could.”