The Richmond Observer – OPINION: The Federal Reserve: enemy of American workers


According to figures released by the US government, consumer prices have risen 7.5% over the past year, the biggest increase since 1982. Actual price increases are even worse than the figures suggest. of the government, since the “official” statistics are manipulated to underestimate the real rate of price increase. According to John Williams of ShadowStats, prices have actually increased by around 15% over the past year.

The fact that prices remain at historically high levels shows that inflation is far from “transitory,” as Federal Reserve Chairman Jerome Powell had described it. Continued inflation has led the Federal Reserve Board to suggest that the Fed will start raising interest rates sooner than expected. The Fed can also break with its practice of only raising rates 25 basis points at a time and raising rates in increments of up to 50 basis points. However, the increases the Fed is talking about would still leave interest rates at historic lows. Thus, such interest rate increases would do little or nothing to alleviate the pain of rising prices for average consumers.

Most political “pundits” and politicians, including President Biden, support interest rate hikes to keep up with inflation. However, some progressives oppose raising rates. Opponents of rate hikes fear that raising interest rates will slow economic growth, increase unemployment and drive down wages. These progressives believe in the old fallacy that workers get the easy money. The truth is that workers are the main victims of inflation.

Workers may see their nominal wages (wages not adjusted for inflation) rise while price increases produced by the Fed drive down real wages. This is certainly the case today. In contrast, Federal Reserve money creation benefits crony capitalists who receive the new money created by the Fed before the injection of new money causes prices to rise. This increases the purchasing power of the elite, worsening income inequality.

The creation of new money by the Federal Reserve does more than erode the value of the currency. It also artificially lowers interest rates, which are the price of money. This distorts the signals sent to market participants, leading to investment decisions that do not reflect the true state of the market. The result is a temporary boom, followed by a bust. Workers who find new jobs during the boom lose those jobs during the recession. These workers are then not only unemployed. They are also often saddled with unmanageable debt incurred during the low interest rate, easy money phase of the business cycle.

Progressives could help working people by joining the movement for market-based money. Free market money will be safe from government manipulation, and therefore its value will remain stable. One step toward restoring a free-market monetary system is to let people know the truth about the Federal Reserve by passing Audit the Fed. Another step is to legalize alternative currencies by repealing legal tender laws and ending all capital gains taxes on precious metals and cryptocurrencies. Congress must also begin to cut spending, starting with making deep cuts to our $750 billion military budget and ending all corporate welfare.

Fiat money benefits financial and political elites at the expense of workers whose standard of living is eroded by the actions of the Federal Reserve. As a Texan trade unionist once told me, “Gold has always been the friend of working people. I would add that fiat money is the enemy of the worker.

Dr. Ron Paul is a former obstetrician-gynecologist and U.S. Representative for the State of Texas. Republished by the Ron Paul Institute for Peace and Prosperity. http://ronpaulinstitute.org/archives/featured-articles/2022/february/21/the-federal-reserve-enemy-of-american-workers/

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