Kenneth Schortgen Jr
Examiner.com
On Sept. 24, Ron Paul, Congressman and Chairman of the House Subcommittee on Monetary Policy, provided a more in-depth look at the Federal Reserve’s recent action of open ended quantitative easing (QE), and continued manipulation of interest rates. In Congressman Paul’s summary, a large consequence of the Fed manipulating interest rates will mean that the central bank is instituting price controls over goods and services for the American people.
Because the interest rate is the price of money, manipulation of interest rates has the same effect in the market for loanable funds as price controls have in markets for goods and services.
Another effect of the injections of credit into the system is that prices rise. More money chasing the same amount of goods results in a rise in prices. Wall Street and the banking system gain the use of the new credit before prices rise. Main Street, however, sees the prices rise before they are able to take advantage of the newly-created credit. The purchasing power of the dollar is eroded and the standard of living of the American people drops. – Paul.House.Gov
The interesting point in all of this, is that price controls are usually the domain of a dictator, or a nation at war. During the Great Depression, the government implemented price controls through the policies of crop and livestock destruction. By ordering farmers to grow less, and paying them to kill their livestock, prices rose because supply was prematurely cut off from normal market conditions.
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