No Janet, We Cannot Afford More Wars

Bloomberg Intelligence recently released an analysis showing that a year of interest payments on the national debt now exceeds one trillion dollars. This should have been a wake-up call to Congress and the Biden administration, but it was largely ignored. The political and financial elites’ continued failure to acknowledge the dangers posed by the ever-growing national debt is exemplified by Treasury Secretary Janet Yellen’s comment that America can, and must, fund both the Ukraine war and the Israel war.

As a former Fed Chair, Yellen no doubt thinks it does not matter how much the US government spends as long as the Fed can monetize the debt. Monetizing federal debt requires the Federal Reserve to keep interest rates low. These low rates incentivize government, businesses, and private citizens to take on large amounts of debt. This may not be a problem as long as the central bank keeps rates low. However, once the central bank raises rates, many individuals, businesses, and even governments will be unable to manage their debt. Businesses will also learn they were misled by low rates into making unwise investments, creating a short-term boom, a bubble, and a crash.

The most pernicious Fed-created bubble is the government bubble. The Fed’s willingness to facilitate continued increased spending on war and welfare leads to massive deficits. The increased spending and the low interest rates necessary to monetize the debt will inevitably lead to a bursting of the government bubble, followed by a major economic crisis.

The only reason the government bubble has not yet burst is the dollar remains the world’s reserve currency. However, the dollar could soon lose that status.

A collapse of the US dollar empire would benefit people in countries like Ukraine and Israel because it would allow them to work for peaceful relations with their neighbors instead of having their interests sacrificed for the profits of the US military-industrial complex.

Some American politicians claim military spending is justified because it creates US manufacturing jobs. This ignores the fact that a dollar spent creating weapons of war is a dollar that cannot be spent creating products that meet consumers’ needs and wants.

The fact that the Fed’s modest interest rate increases were difficult for many individuals and businesses suggests that we are nearing an end to the fiat money era that began in 1971 when Richard Nixon severed the last link between the US dollar and gold.

The only way to avoid a dollar crisis followed by an economic meltdown is for Congress to stop pouring money into a futile attempt to run the world and instead pursue a policy of peace and free trade with all. This will not only benefit the American people, but people around the globe. Ending the warfare state will free up resources that can be used to support those truly dependent on government programs while we unwind the welfare state and transfer to local charities and religious institutions responsibility for aid to those in need.

It is no coincidence that America’s transformation from a constitutional republic into a welfare-warfare state that seeks to control the people’s lives and run the world was not completed until the creation of the IRS and the Federal Reserve. The American people’s liberty and prosperity will never be safe from power-hungry politicians and self-anointed world saviors until the income tax is repealed and the Fed is audited and ended.

Author: Ron Paul

Ron PaulRon Paul is a former Republican congressman from Texas. He was the 1988 Libertarian Party candidate for president.