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Ron Paul: “Does The Bell Toll For The Fed?”

THE POLITICS BEHIND THE SECRETIVE CENTRAL BANK’S LOOMING RATE HIKE || by RON PAUL  || Last week Federal Reserve Chair Janet Yellen hinted that the Federal Reserve Board will increase interest rates at the board’s December meeting.  The positive jobs report that was released following Yellen’s remarks caused many observers to say…

THE POLITICS BEHIND THE SECRETIVE CENTRAL BANK’S LOOMING RATE HIKE

ron paul|| by RON PAUL  || Last week Federal Reserve Chair Janet Yellen hinted that the Federal Reserve Board will increase interest rates at the board’s December meeting.  The positive jobs report that was released following Yellen’s remarks caused many observers to say that the Federal Reserve’s first interest rate increase in almost a decade is practically inevitable.

However, there are several reasons to doubt that the Fed will increase rates anytime in the near future.  One reason is that the official unemployment rate understates unemployment by ignoring the over 94 million Americans who have either withdrawn from the labor force or settled for part-time work.  Presumably the Federal Reserve Board has access to the real unemployment numbers and is thus aware that the economy is actually far from full employment.

The decline in the stock market following Friday’s jobs report was attributed to many investors’ fears over the impact of the predicted interest rate increase.  Wall Street’s jitters about the effects of a rate increase is another reason to doubt that the Fed will soon increase rates.  After all, according to former Federal Reserve official Andrew Huszar, protecting Wall Street was the main goal of “quantitative easing,” so why would the Fed now risk a Christmastime downturn in the stock markets?

Donald Trump made headlines last week by accusing Janet Yellen of keeping interest rates low because she does not want to risk another economic downturn in President Barack Obama’s last year in office.  I have many disagreements with Mr. Trump, but I do agree with him that the Federal Reserve’s polices may be influenced by partisan politics.

Janet Yellen would hardly be the first Fed chair to allow politics to influence decision-making.  Almost all Fed chairs have felt pressure to “adjust” monetary policy to suit the incumbent administration, and almost all have bowed to the pressure.  Economists refer to the Fed’s propensity to tailor monetary policy to suit the needs of incumbent presidents as the “political” business cycle.

Presidents of both parties, and all ideologies, have interfered with the Federal Reserve’s conduct of monetary policy.  President Dwight D. Eisenhower actually threatened to force the Fed chair to resign if he did not give in to Ike’s demands for easy money, while then-Federal Reserve Chair Arthur Burns was taped joking about Fed independence with President Richard Nixon.

The failure of the Fed’s policies of massive money creation, corporate bailouts, and quantitative easing to produce economic growth is a sign that the fiat money system’s day of reckoning is near. The only way to prevent the monetary system’s inevitable crash from causing a major economic crisis is the restoration of a free-market monetary policy.

One positive step Congress may take this year is passing the Audit the Fed bill.  Fortunately, Senator Rand Paul is using Senate rules to force the Senate to hold a roll-call vote on Audit the Fed. The vote is expected to take place in the next two-to-three weeks. If Audit the Fed passes, the American people can finally learn the full truth about the Fed’s operations. If it fails, the American people will at least know which senators side with them and which ones side with the Federal Reserve.

Allowing a secretive central bank to control monetary policy has resulting in an ever-expanding government, growing income inequality, a series of ever-worsening economic crises, and a steady erosion of the dollar’s purchasing power. Unless this system is changed, America, and the world, will soon experience a major economic crisis. It is time to finally audit, then end, the Fed.

Ron Paul is a former U.S. Congressman from Texas and the leader of the pro-liberty, pro-free market movement in the United States. His weekly column – reprinted with permission – can be found here.

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98 comments

TARevolution November 9, 2015 at 8:40 am

FITS news: Dr. Carson called your report on him a BOLDFACE LIE. Will you retract?…

No one gives a fuck about this Dumbass, Liberal-Tarian Has-Been RonPaul. Unless he wants to explain how stupid it is for him and Obama to give Iran a Nuke, and free up $150 billion to kill Americans with…(You Damn FOOLS)…

Anyway: FITS Lied- Carson Thrives….Thank you for attacking him….he raised millions off of Dumbfucks like you…

Reply
stumpknocker November 9, 2015 at 8:52 am

since you want to start the week off, off topic, check out the best blues musician you never heard of. he will rock your world with 2 hubcaps and a broomstick.

https://www.youtube.com/watch?v=S-vSZFEWHlo

Reply
Another one bites the dust November 9, 2015 at 9:04 am

Carson is done. Too many lies about his past.
Trump was horrible on SNL. He’s nearly done too.
Next!

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TroubleBaby November 9, 2015 at 9:26 am

Trump was horrible, & it was a really bad move politically, but SNL has been mostly unwatchable for quite some time now.

Really unfunny, with poor writing seeming to be the major problem.(it seems like the players could be funny with decent writing)

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Rocky Verdad November 9, 2015 at 9:42 am

Ah but there are great moments from SNL. This morning taking my 6th grader to school I asked her what she was studying in Social Studies. She said ancient Egypt. So I got her to Google on the phone Steve Martin’ doing King Tut.

King Tut
King Tut
Now when he was a young boy, he never thought he’d see, people stand in line, to see the boy king.

King Tut,
How’d you get so funky,
Funky Tut,
Did you do the monkey………

Reply
TroubleBaby November 9, 2015 at 9:44 am

I love old SNL…just sayin it’s been shit for some time now though.

Rocky Verdad November 9, 2015 at 9:46 am

Ah, it’s OK. I’m just older and staying up to 1 a.m. just to watch that crap after a busy day of running around to soccer, chores and stuff with the kids and the Mrs. – no real desire for that. But if I was still attached to a bong and in college, I might.

TroubleBaby November 9, 2015 at 9:48 am

Oh yea, I’m in the same mode for the most part.

Rocky Verdad November 9, 2015 at 9:51 am

I loved Final Jeoperdy with the question, The Sound a Dog makes, Sean Connery says Moo, and then when told that’s incorrect, he says “Well that’s the sound your Mother made last night.”

TroubleBaby November 9, 2015 at 9:56 am

Sean Connery is my favorite on SNL Jeopardy.

“Your mother’s a whore.”

lol…kinda like Big T, but with more intelligence.

http://www.youtube.com/watch?v=STAk6sPjEbw

GOPeanuts November 9, 2015 at 9:06 am

Carson lies constantly. Will you retract?

Reply
stumpknocker November 9, 2015 at 9:10 am

the craziness of this situation is he is running on “i really did try to gut innocent person with a knife in a fit of rage”.

Reply
TroubleBaby November 9, 2015 at 9:28 am

Don’t forget that he also tried to hit his mother in the head with a hammer….my god…many have teenage angst, but a hammer to the head?

Reply
Derp November 9, 2015 at 9:55 am

Ben acts like he’s taken a few hammers to the head in his lifetime.

flip November 9, 2015 at 10:01 am

You just hate blacks and Christians.If he was a pot smoking homo you and your libetard ilk would love him.

Rocky Verdad November 9, 2015 at 10:04 am

We love you.

Derp November 9, 2015 at 10:05 am

He did claim he smoked pot and gave out hand jobs to his bros in his book…Gifted Hands

TroubleBaby November 9, 2015 at 10:06 am

“You just hate blacks and Christians”

lol

“If he was a pot smoking homo”

I don’t like you and you’re a homo.

flip November 9, 2015 at 10:11 am

You don’t like yourself.Not surprised.One needs a translator to read your babbling,rambling socialist bullshit.

TroubleBaby November 9, 2015 at 10:12 am

“You don’t like yourself.”

lol, is this the 1st grade?

“I’m rubber, you’re glue!”

“One needs a translator to read your babbling,rambling socialist bullshit.”

lol…not only are my rants not socialist, one only has to have a brain to understand them.

Derp November 9, 2015 at 9:54 am

How ironic that playing a ‘thug’ appeals to these Tea Tard idiots?

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flip November 9, 2015 at 9:59 am

Obama ran as a radical Islamic,American hating “thug” and got elected twice.That seemed to appeal to American hating socialists.

Rocky Verdad November 9, 2015 at 10:04 am

And independents.

flip November 9, 2015 at 10:09 am

He lied about who he was.Now that he doesn’t have to run again he has been exposed.

Obama destroyed the Democrat Party.Obamacare is finished and NO Amnesty.All you are left with are queers living in marital bliss.

TARevolution November 9, 2015 at 10:12 am

Exactly. You’re on a roll today. Keep it up.

Rocky Verdad November 9, 2015 at 10:13 am

Yawn!!!! Hey didn’t another GOP state just announce the medicaid expansion?

flip November 9, 2015 at 10:15 am

Kentucky just announced they are cutting the Obamacare Medicaid. New Gov. Revised Obamacare premium increases have been changed from 7% to 21%.

Bammmmm BAaaa Bammmmm

Rocky Verdad November 9, 2015 at 10:18 am

Yeah, sure they are. Bet in the end he doesn’t.

flip November 9, 2015 at 10:23 am

He also issued executive order taking clerks name off of marriage licence in Kentucky.

BABAMMMM

Rocky Verdad November 9, 2015 at 10:34 am

So they can issue gay marriage licenses? Good for him!!

Rocky Verdad November 9, 2015 at 10:23 am

Actually what Bevin says he’s going to do is take down the state run exchange, and migrate it over to Healthcare.gov – the federal exchange. Yeah, that’s a big change.

flip November 9, 2015 at 10:24 am

Sure is moron.It is no longer FREE.They will have to PAY!!!

BA BAMMMM!!

Rocky Verdad November 9, 2015 at 10:33 am

If he gets his waiver. But they still get the Medicaid, and they still have the exchange. And, since he’ll want the waiver, he won’t get the 90% Fed cash – meaning he’ll end up with a $1 billion hole in his budget. Again, he seems like a smart guy, he certainly convinced Tea Party people to vote for him, so when presented with all the facts, he’ll back down.

flip November 9, 2015 at 11:18 am

They won’t get Medicaid.He is eliminating those at 138% of the poverty level.25% of the state is on Obamacare expanded Medicaid and it costing the state 150 million dollars.

You are a fool spreading lies and a poster child on why Blevins won.

Rocky Verdad November 9, 2015 at 11:31 am

He said he’d reduce those eligible to below the 138% expansion line, meaning the 30% increase he still had for those eligible prior to expansion that didn’t know they were, stay. And the 100% cost share (that goes to 90% cost share) doesn’t stay.

Look Flip, if you’re still in Florida do a little research. Scott refused the expansion. Yet what has happened, is that there was about only 80% on Medicaid prior to ACA out of the total pool eligible. When the state decided to let the Feds handle the exchange, the first set of questions determined if you were eligible. If you were, you went that route. So the state of Florida saw a 20% increase in enrollees during 2013 through 2015. Since they didn’t take the expansion, that estimated $2.6 billion cost, is being carried directly by the residents of Florida. They got a repreive from the sunsetting of a sweetheard deal Bush cut with his bro back in 2007 but still had to pony up about $1.8 billion this past year and next year, that hole is still there at the $2.6 billion figure. So great planning by the GOP Governors again. Bevin will either keep what he has, or see a $2 billion hole in his budget.

flip November 9, 2015 at 12:18 pm

Rocky you throw up phony numbers to hide the facts.
You can’t give MILLIONS FREE health insurance for NOTHING.It is bankrupting the states and the insurance is worth nothing.Doctors are not taking these new patients.
Obamacare has failed as premiums are skyrocketing and people can’t afford.Wait until the fines come due.

flip November 9, 2015 at 12:21 pm

By Edward Morrissey

November 5, 2015

A key piece of the Obama administration’s plan to control the health insurance market is in a state of collapse. With it will go the philosophical underpinning of big government solutions to private-sector problems–and that will pose a core question for voters in the upcoming national elections.

In the original plan for the Affordable Care Act (ACA), better known as Obamacare, Democrats wanted to include a “public option” in the health insurance exchanges – a government-run plan that advocates claimed would guarantee affordable access. To critics and consumers, it looked like an end run to a single-payer health care system.

Related: Democrats Begin the Long, Tortuous Retreat from Obamacare

http://www.thefiscaltimes.com/Columns/2015/11/05/Collapsing-Obamacare-Co-ops-Signal-Big-Trouble-Come

Bible Thumper November 9, 2015 at 10:01 am

Tea parties aren’t the only ones. Former Black Panther terrorist seem to be popular in colleges and universities.

Derp November 9, 2015 at 10:04 am

Is that a Carson quote?
Sounds retarded enough.

Rocky Verdad November 9, 2015 at 9:38 am

I got a scholarship to West Point for ya’ – wink, wink!!!!!

Reply
erneba November 9, 2015 at 9:18 am

“The failure of the Fed’s policies of
massive money creation, corporate bailouts, and quantitative easing to
produce economic growth is a sign that the fiat money system’s day of
reckoning is near.”
That statement is completely true and has our economy on the path to failure.

If you look at the classical reasons for the Fed to increase interest rates, none of them exist:
Interest rates are increased to “cool off” the economy. We certainly don,t need that.
Stabilize the economy. no, don’t need that.
Prevent inflation. Prices have been relatively stable.

There has been a long series of government interference and control of free market over the past few decades that has led the decline and current stagnation of our economy. Even the government “quantitative easing” has not gotten us back to a stable free market.
The government needs to get out of the business of trying to control the economy. Our current mess is a result of too little of the free market and too much government control.

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TroubleBaby November 9, 2015 at 9:35 am

Fiat currencies are specifically used to deal with shortfalls in government funding, which is why governments will never allow free market currency.

Usually they come about as a result of needing to pay for war and government not having the money or the politically means to raise taxes-

But it’s reinforced by those looking to fund the welfare state because they know there’s not enough money to fund it either.

The cycle seems to repeat itself still today even though it’s been going on for thousands of years, maybe the internet will eventually create some type of informed population that will have enough sway to stop it, but it looks like it’s going to have to fail a few more times again before “the people” in general “get it”, and even then it might be doubtful.

I understand why Menken enjoyed alcohol so much.

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erneba November 9, 2015 at 9:39 am

Yeah, decades of abuse by over-spending bureaucrats is not to be corrected by a simple move from the Fed to raise interest rates. It is like fighting cancer with cough syrup.

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TroubleBaby November 9, 2015 at 9:43 am

Just the idea that money supply should grow 2% is rarely challenged in mainstream economics anymore…there were a few that predicted the housing bubble, but there were mostly laughed at-

It’ll be the same here when one day something happens to change the paradigm, it’ll probably be the same bullshit answer to it to, “No one could see this coming!”

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erneba November 9, 2015 at 9:49 am

Most people believe that the Federal government can’t fail financially. It is the same concept as running a household. You can not overspend and underpay for a sustained period of time, and yes, on that level, some people can see it coming but won’t apply the same logic to government finances.

TroubleBaby November 9, 2015 at 9:53 am

It’s just that the timelines are longer, so it’s not exactly like a household in that the household can’t print up money-

The irony is, if the average household could print up money why would they have a deficit? They wouldn’t!

That shows how out of hand the Fed is, they print money and still can’t cover the debt/deficit.

It’s ridiculous.

The only thing constraining them is fear of hyperinflation…but they simply have way too much money sitting out there that could simply become “hot” money in days and be really catastrophic…there’s no clear idea of what going to happen with the money that China is dumping now too via Treasuries…which is a double whammy because they not only are no longer funding the deficit/debt, but actually helping to debase the currency further.

Nobody really knows how much of that currency is going to be absorbed yet because it’s just started.

Lots of bad potential out there…

erneba November 9, 2015 at 10:00 am

Those are some good points and all the factors seem to accumulate and wreak their havoc at at the same time. The longer we go down this road, the tougher it will be to gain control. It really puts me in somewhat of a fear for our future. As you say, “some will not see it coming,” when it looms on the horizon day after day.

flip November 9, 2015 at 10:03 am

Just last week she was talking about to MINUS interest rates-paying the banks to take money. All about politics and the FED hasn’t a clue.

erneba November 9, 2015 at 10:16 am

We really need to get the “government” out of the “government.” business.

flip November 9, 2015 at 10:18 am

Yes sir.Love the way you breakdown things.Can you become a translator for Trouble Tard?

Tennessee November 9, 2015 at 3:30 pm

There are some who also fear that OPEC could potentially stray away from the U.S. Dollar even more and go to a basket of currencies. I don’t know how legitimate that idea is, but it seems it could be disastrous for our currency.

TroubleBaby November 9, 2015 at 4:00 pm

Well, the Petrodollar is a key component of many holding the whole Ponzi scheme together. That, Treasury purchases & “faith”….all of which seem dubious at this moment in time.

Who knows when it’ll bust…but it will one day.

Bible Thumper November 9, 2015 at 9:57 am

Paul does not make sense. He seems critical of the Fed allowing itself to be influenced by politics, yet he advocates policies that would take away its independence or return it’s functions to political institutions.

Janet Yellen would hardly be the first Fed chair to allow politics to influence decision-making. 

Allowing a secretive central bank to control monetary policy….

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TroubleBaby November 9, 2015 at 9:59 am

I don’t follow in light of this paragraph:

“Presidents of both parties, and all ideologies, have interfered with the Federal Reserve’s conduct of monetary policy. President Dwight D. Eisenhower actually threatened to force the Fed chair to resign if he did not give in to Ike’s demands for easy money, while then-Federal Reserve Chair Arthur Burns was taped joking about Fed independence with President Richard Nixon.”

He doesn’t seem to be advocating “policies that would take away its independence” to me, how do you see that?

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Bible Thumper November 9, 2015 at 10:18 am

“Does the Bell Toll for the Fed”

Ron Paul is to monetary policy what Global wwarmers are to the environment. Everything that happens is proof.

If things are bad it’s the Fed’s fault. If things improve, it’s artificial, a bubble, setting us up for an even bigger crash. Everthing that happens proves Paul’s point no matter how contradictory his logic is.

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TroubleBaby November 9, 2015 at 10:24 am

You never really answered my question….

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Bible Thumper November 9, 2015 at 10:30 am

This link should answer you questions about what Paul’s opinion is regarding Fed independence.
https://en.m.wikipedia.org/wiki/End_the_Fed

TroubleBaby November 9, 2015 at 10:36 am

The “End the Fed” book summary is his proof he wants a politicized Fed?

lol…really?

Do you have specific statement of his that suggest what you’re saying?

Bible Thumper November 9, 2015 at 10:44 am

Page 209: “with the financial system in shambles, people are open to reform. We have the opportunity for a strong intellectual and political campaign challenging the Federal Reserve to be heard.”

TroubleBaby November 9, 2015 at 10:52 am

“We have the opportunity for a strong intellectual and political campaign challenging the Federal Reserve to be heard.”

Ok, you’re missing his point. His “political campaign” is getting rid of the Fed…not politicizing it’s specific policies.

Gordon November 9, 2015 at 10:02 am

FitsNews’ comment section is like the old farts who are too lazy to meet up and sit around at Walmart, drinking coffee.

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Rocky Verdad November 9, 2015 at 10:03 am

Clue – don’t take economic advice from Ron Paul.

We’re looking at a .25% (in Cap Markets lingo 25-basis-points) increase to the Feds overnight rate. The impact to the real interest rates we pay, will probably be, Goose Egg. It will tighten operating margins on lenders, by a nit. Eventually we’ll see real rates increase anyway – as demand continues to increase for capital. So even if rates say on home loans increased from 4.0 to 4.25% – that would amount to an additional monthly interest payment increase of $45 on a $200,000 mortgage. And that increase will be baked in long before the Dec Fed meeting.

As for the idea the Fed does it to “cool” off the economy, it also does it to stave off inflationary pressures. All this suggests is that after 6 years after the end of the financial crisis and the Great Recession, we’re finally in a position to increase rates, suggesting the economy has now placed itself on solid footing.

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flip November 9, 2015 at 10:07 am

Horseshit.Just last week the Fed was talking about MINUS interest rates and paying banks to take money.

This new message is all about politics and it is coming from polls at the wH.REAL unemployment is 20%,50% of the country on welfare including 47 million on food stamps.

The economy is horrible for middle America.

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Reality November 9, 2015 at 10:09 am

Nah, just for broke losers like you and GT who can’t get it together. Don’t worry you’ll be able to blame Hillary for all of your shortcomings here soon.

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Rocky Verdad November 9, 2015 at 10:11 am

Real unemployment at 20%???? – you really are disconnected from reality aren’t you. BTW – the latest food stamp number is 45 million and falling. Why do you hate the fact the economy is improving and getting better. God, you’re hatred for Obama (based on what – seems like many factors starting with his being mixed race) – is just astounding. Ohio’s unemployment rate for September was 4.5% – yeah, middle America just dying. It must suck to inhale the Breitbart crapville narrative and then try and reconcile with reality.

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flip November 9, 2015 at 10:13 am

20%.Read it and weep. 48 million adults 21-65 haven’t worked a day in 12 months.

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Rocky Verdad November 9, 2015 at 10:15 am

Bull – it’s 5.0% – they didn’t change how they calculate. Get your head out of your hate box.

flip November 9, 2015 at 10:16 am

Sure they did.They stopped counting those that stopped looking for work and changed calculation for part time workers.

Bammm Baaaaa BAAAAMMMMM

Rocky Verdad November 9, 2015 at 10:18 am

Dream on buddy. Go to a Mall. Ever see a full Mall with 20% unemployment. You guys spend more time making up numbers and excuses to support your failed predictions than ISIS spends killing Shias.

flip November 9, 2015 at 10:20 am

Obamacare-FAILED
Amnesty-NO
Gay marriage-WRONG however ended up helping Republicans by exposing the Democrat Party.

Rocky Verdad November 9, 2015 at 10:21 am

Sure, uninsured rate down to 9% – a real failure. I’m done with you – you have no grounding in reality.

flip November 9, 2015 at 10:25 am

You just don’t like facts.

Rocky Verdad November 9, 2015 at 10:28 am

Let me know if you ever have any.

stumpknocker November 9, 2015 at 10:36 am

factalypse now man!

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Louis Nardozi November 10, 2015 at 10:50 am

If you disagree with this troll, it’s “hate”. What a weakling in an argument.

TroubleBaby November 9, 2015 at 10:10 am

“Clue – don’t take economic advice from Ron Paul.”

That’s not really fair, he’s pretty well off financially from making a lot of the right decisions(not that a life in politics isn’t a good living mind you), & successfully predicted the housing bubble way before everyone else.

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Rocky Verdad November 9, 2015 at 10:12 am

When did he predict it. There were countless folks predicting it as early as late 2005, and early 2006.

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TroubleBaby November 9, 2015 at 10:13 am

Back in 2002….he also warned Barney Frank specifically of the dangers of the CRA back then…

Are you going to make me dredge up a youtube?

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Rocky Verdad November 9, 2015 at 10:17 am

CRA didn’t bring the bubble. Sorry – those loans outperformed the toxic Alt-A and Option ARM stuff the thrigts and Wall Street firms were pushing.

TroubleBaby November 9, 2015 at 10:22 am

“CRA didn’t bring the bubble. Sorry – those loans outperformed”

Not only do we disagree, the loans could have performed fine and the CRA still have been partly responsible for a loan bubble. (and RP didn’t blame the entire bubble on the CRA, it was just one component of many)

You’ve conflated causality.

Rocky Verdad November 9, 2015 at 10:31 am

That’s the business I’ve been in for 24 years. Let me enlighten you – in 2008 if you took a FNMA pools, a CRA pool and a private security pool of Alt-A and Option ARMs, the default rates would have been 10% for the FNMA stuff, 9% for CRA loans, 55% for the Alt-A crap. Get it? So CRA loans had nothing to do with the bubble. They didn’t even increase CRA lending during that time. CRA loans you still had to income and asset qualify, they had minimum FICO scores. ALT-A and Option ARM – no income, no assets, no nothing. By the way, in today’s world CRA loans are a commodity that are bought and sold between lenders to satisfy their CRA requirements.

TroubleBaby November 9, 2015 at 10:33 am

“That’s the business I’ve been in for 24 years.”

Look, with all due respect just because you’re in the mortgage business for 24 years doesn’t mean you understand the dynamics behind property valuation and even further yet, what creates “bubbles”.

I say this with respect too, please don’t misunderstand. You can be very good at your job and still misunderstand, which is why 4 of the 5 big banks got hosed.

You’re entire diatribe on CRA performance actually demonstrates this point. You missed my point entirely.

Rocky Verdad November 9, 2015 at 10:41 am

I have a good bit of knowledge on bubbles (forget housing, etc) – they are created by an unsupported increase in value, and market participants no longer re-act rationally, and will continue to purchase the inflated item, despite obvious signs of the bubble, in anticipation of scooping up all the item they can get. They are predisposed at that point that the values will still increase. In the housing bubble, since rarely do people purchase housing with cash, they relied on loans. In order to sustain the bubble, there needed to be access to easy capital to purchase the loans. The Alt-A and Option ARM stuff was it. (Subprime if you want to call it that – makes no difference to me). So as long as the thrifts would provide essentially “free money” for the purchase of housing, the bubble would perpetuate itself. Until of course, it no longer did. The collapse was two parts – first a majority of lenders were forced to start UW at fully indexed ARM rates, not teaser rates, which immediately reduced demand, setting off the 2007 to early 2008 settling, so to speak, of property values falling about 6%. Then the ALT-A and Option ARM resets started from the 2005 and 2006 production, and defaults began to spike (initially in early 2007 and picking up speed). But see here’s the thing – to tie back to Dr. Paul. The Fed did raise interest rates in 2004 and 2005, and had a net zero impact on lending rates, as Wall Street and others made funds available at still low rates (for that time). The Fed sets a floor, not the retail rate.

TroubleBaby November 9, 2015 at 10:50 am

I’m glad to see you’re open minded Rocky(truly), I take an “Austrian Business Cycle” viewpoint on things-

When you combine money expansion with those qualify for loans that wouldn’t have without the CRA(and those are just two factors, not ALL the factors), my argument is that they contribute to rising house values REGARDLESS of whether CRA loans perform or not.

Rocky Verdad November 9, 2015 at 11:06 am

Take away the CRA label, and just say expansion of credit without rational underwriting criteria and I think we’re on the same page. (BTW – the Austrian view clearly shines through). I’m not married to either a liberal or conservative view on it – more pragmatic. I do, for example, support FNMA and FHLMC, because I believe they provide a way to channel patient capital into the housing market keeping rates affordable. At the same time, we learned from the crash, that going foward FNMA and FHLMC need to capitalize loan loss reserves beyond what they had in the past, more akin to private lenders.

TroubleBaby November 9, 2015 at 11:12 am

“Take away the CRA label, and just say expansion of credit without rational underwriting criteria and I think we’re on the same page. ”

Bingo! However, I can’t “take away” the CRA label…because it did exactly that. (otherwise, there would never have been a “CRA”, because those people would have been able to get loans)

:)

Rocky Verdad November 9, 2015 at 11:35 am

OK, I guess it’s just a matter of degree. Without naming names I was unfortunately an employee of a large thrift who shall stay nameless. In any event, at one point I was tasked with migrating the CRA production to a new location. That monthly loan production, was no more than 3% of our totel loan production. The vast majority of our loan production was the crap stuff (BTW I left before the crap got stopped up in the toilet). Oh, and on forecasting the bubble, I actually used my USC-Columbia economitric skills to see it myself, waited out the cycle before we picked up our current house, and saved myself about $175,000 – clearly allowing my Gamecock education to more than pay for itself.

TroubleBaby November 9, 2015 at 11:36 am

lol…good for you!

So it actually seems like you see some common sense/logic in Austrian Business Cycle theory?

Rocky Verdad November 9, 2015 at 10:41 am

No offense taken, I often miss the point.

TroubleBaby November 9, 2015 at 10:14 am

btw, “who’s countless folks”? I only remember Schiff back around 05′.

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Rocky Verdad November 9, 2015 at 10:16 am

There was a few Wall Street traders who predicted it, and purchased their offsets accordingly. A lot of economists, particularly one at Wells Fargo, predicting it as well. Hence Wells had a limited exposure. The Fed was predicting it, that’s why they forced changes to bank UW standard in 2006.

TroubleBaby November 9, 2015 at 10:21 am

“There was a few Wall Street traders who predicted it”

You haven’t listed them….we have one of the Big Banks not having the same exposure…that doesn’t qualify as “countless folks” to me…

If it was “countless folks” then there would have been a crisis earlier(or not at all!) IMO.

tomstickler November 9, 2015 at 10:53 am

Brother Charlie Pierce has proposed his “5-minute Rule” where Father Liberty or his spawn start out making a little sense, but at the end of 5 minutes, they hang a right to Crazytown.

Depending on the reading speed for the lips-movers, this was at the seventh paragraph for this latest.

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tomstickler November 9, 2015 at 11:07 am

For those wanting a more learned view of possible Fed action: http://economistsview.typepad.com/timduy/2015/11/onto-the-next-question.html

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Manray9 November 9, 2015 at 11:15 am

If Congress passes the obstructionist Fed Audit Bill do you think Obama, as the only responsible grown-up in Washington, will sign it? Know-Nothings in American politics have opposed central bank activities since before Jackson vetoed the charter of the Second U.S. Bank in 1833. Jackson’s protege and successor, Martin Van Buren, paid the price with the Panic of ’37 which drove him from office. Does Ron Paul believe the U.S. should be the only advanced country in the world without a central bank?

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ajweberman November 14, 2015 at 9:44 am

Ron Paul’s gold investment dropped 70% from the all time high. Does the Bell Toll for Ron Paul?

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