Via Operation Twisted Logic, an article by Detlev Schlichter, author of Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown:
… Like all state bureaucracies, the Fed is in fact struggling with problems that are predominantly of its own making. The Fed is the reason we are in this crisis. Or, more specifically, the present economic crisis is the inevitable consequence of the political decision to adopt a system of unconstrained, constantly expanding fiat money, in which the central bank, in its role as lender of last resort, systematically encourages bank lending and thereby the extension of credit on the basis of money printing rather than true savings. This system came into full bloom only in 1971, when Nixon severed the last link to gold and thus initiated, for the first time in history, a global system of unrestricted fiat-money creation.
The truth behind the deepening economic crisis is that, for 40 years, politicians have either not understood the monetary system or have acquiesced in the debasement of money to pay indirectly for promises which could not be funded out of taxation. The inevitable result is this crisis with its profound consequences for the welfare of hundreds of millions, perhaps billions, of people.
Sooner or later, the intellectual elite will have to accept that artificially cheap credit cannot overcome the simple law of reality that production must come before consumption. Low interest rates ought to be a sign of prior production and prosperity but central banks have perverted that crucial price signal for decades, massively misdirecting honest entrepreneurship.
There is before us a deeply painful correction. I wish it were not true – no one wants it – but neither denial nor despair will carry us through to lasting prosperity. We urgently need deregulation, balanced budgets, simpler and lower taxes and monetary reform. Less would be mere tinkering.
Read Detlev’s full article here.