Ron Paul on Central Banks and Money Printing

Ron Paul here. I have been a long-time opponent of the Federal Reserve System. The Fed’s loose monetary policies have fueled bubbles and financial crises almost from the Fed’s inception in 1913. Prices have risen continuously since that time, and especially since the dollar’s last link to gold was broken in 1971. More recently, the Fed has engaged in policies of quantitative easing, creating money out of thin air to purchase financial assets.

But the Fed isn’t acting alone. Its counterparts overseas, including the European Central Bank (ECB), the Bank of Japan (BOJ), and the Swiss National Bank have been engaging in similar policies. Their policies of quantitative easing entailed creating trillions of dollars worth of new money and using it to purchase stocks and bonds in an attempt to boost the economy. That was what has been driving financial markets to new highs over the past year, but once that money creation ends, the financial market bubble will burst.

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Central Banks Caused the Stock Market Bubble

Central banks bought stocks and bonds for a variety of reasons, whether it be the boosting of their national economies or the diversification of their own balance sheets. In the case of the Federal Reserve, which has bought, sold, and held Treasury securities for decades, it began to purchase mortgage-backed securities after the financial crisis, taking them off banks’ balance sheets and providing banks with newly-created money. The BOJ began to purchase exchange-traded funds, providing support to Japanese stock markets. The Swiss National Bank purchased billions of dollars of American stocks. All of that fueled a bubble in stock and bond markets that is only now becoming apparent to most people.

But central banks cannot continue to purchase stocks forever because they cannot print money ad infinitum without creating massive and damaging inflation. At some point they have to say that enough is enough, and they are quickly reaching that point. The BOJ is wearying of its quantitative easing and negative interest rate policies. The ECB has yet to admit defeat, but there is significant pushback within Europe, especially from German central bankers, that may provide enough pressure that the ECB will have to end its asset purchases too. Many Fed policymakers have stated that they favor beginning to decrease the Fed’s balance sheet, shedding assets in order to return to a more normal monetary policy stance.

Market Collapse Coming

The most likely outcome from all of this, then, is a collapse in stock and bond markets. Without central banks propping up stocks and bonds with billions and trillions of dollars worth of purchases, prices will correct to levels that the market can bear. The currently overheated stock and bond markets will see prices fall back to more normal levels, wiping out trillions of dollars of wealth on paper. Those who suffer the most will be those who trusted in this overheated market and invested most heavily in stocks, bonds, and mutual funds. When the next crash comes, ordinary workers who were hoping to create a nice retirement nest egg will see their savings and investments drastically slashed.

If you want to protect yourself and your investment portfolio from this coming crash, you might look into investing in a gold or silver IRA. Gold and silver have stood the test of time, serving as money, stores of value, and safe havens in times of market distress. Gold and silver even rise in value as markets decrease, as their safe haven status means that demand increases during tough economic times. A portfolio that contains gold and silver is a solid step in diversifying your assets, ensuring that not all of your eggs are placed into the overheated Wall Street stock and bond basket. I have invested in gold silver for decades, and they have done very well for me over time in protecting my wealth. Maybe it’s time that you do the same, and look into providing some security for your retirement savings by investing in gold and silver.