Farrell: The Kings of Investment Fraud

By Steve Farrell

The Liberty Letters, July 2008, Letter 4

In his national bestseller, “The Revolution: A Manifesto,” Congressman Ron Paul addressed with precision and frankness a number of “forbidden issues” in American politics, one of them: the ability of the Federal Reserve to expand the money supply (the very definition of inflation) at will, a power that swiftly brings about a devaluing of every dollar in the marketplace or that great hidden tax of rising prices amidst stagnant wages.

A tax we all pay, though our President, Congressmen, and media do a bang up job of hiding this truth from us.

Another unmentionable: economic bubbles that by and by burst, bringing vast fortunes, business empires, and ordinary investors to ruin overnight, again, courtesy, not of ‘evil’ free market capitalism, but of that hidden hand of a federal government that uses the Fed to tinker with the money supply, controlling and distorting free market forces.

Of the latter, he writes:

Inflation of the money supply also produces financial bubbles and instability. The monetary inflation of the 1990’s helped yield $145 billion in profits for NASDAQ companies between 1996 and 2000. That entire amount was then lost in a single year–not to mention the trillions of dollars of paper losses in stock values form their peak in early 2000.

Politicians are all tears and pity about large stock-market losses, but they never make a connection between the bubble economy and the monetary inflation generated by the Federal Reserve.

Congress has chosen instead to blame the analysts for misleading investors–a drop in the bucket compared to the misleading information for which the Federal Reserve has been responsible, what with the artificial low interest rates it has brought about and a financial market made flush with generous new credit at ever sign of a correction over the past ten years.

By preventing the liquidation of bad debt and the elimination of malinvestment and overcapacity, the Federal Reserve’s actions help keep financial bubbles inflated and make the eventual collapse all the more severe.

And so the question is, who’s guilty of the more weightier crime when it comes to deceiving investors and taxpayers, the relatively small time money managers of private enterprise, or the national money managers who make and break the national economy (and, potentially, the world’s with it) with artificially created booms and busts, recessions and depressions, and this via a Fabian inspired financial sleight of hand?

The beauty of this sleight of hand, by the way, at least for Republicans, is that it allows them to commit the additional fraud of bragging to the folks at home that they are tightfisted, small government conservatives that will are daily fighting the good fight of the tax cutter, even as they finance a record expansion of the cost, size, and reach of government by covering the budgetary shortfall their ‘tax cuts’ caused with loans.

So when you think about it, that makes the Republican Party potentially, if not in fact, the more dishonest and dangerous of the two major parties, for at least the Democrats make less of an issue of hiding their socialist tendencies and their love of tax hikes, while the Republicans finance the same hikes and government expansion with interest.

Forget the rhetoric. Look to results. The Kings of Investment Fraud are congressmen and presidents, democrats and republicans, lawmakers and law enforcers – socialists, nearly to the last (wittingly or not) – the very people who wag their fingers from atop their perch of power at capitalism, or its nickel and dime panhandlers, even as they make havoc on the whole of America, and never once wince.

Steve Farrell is Editor In Chief of Stiff Right Jab