Recently I had the opportunity to question Federal Reserve Chairman
Ben Bernanke when he appeared before the congressional Joint Economic
committee. The topic that morning was the state of the American
economy, and many of my colleagues raised questions about how the Fed
might better "regulate" things to ease fears of an economic downturn.
The tenor of my colleagues' questions suggested that Mr. Bernanke's
job is nothing less than to run the U.S. economy, like some kind of
Soviet central planner.

Certainly it's true that Mr. Bernanke can drastically affect the
economy at the drop of a hat, simply by making decisions about the
money supply and interest rates. But why do members of Congress assume
this is good? Why do we accept without objection that a small group of
people on the Federal Reserve Board wields so much power over our
economic well-being? Is centralized, monopoly control over our money
even compatible with a supposedly free-market economy?

Few Americans give much thought to the Federal Reserve System or
monetary policy in general. But even as they strive to earn a living,
and hopefully save or invest for the future, Congress and the Federal
Reserve Bank are working insidiously against them. Day by day, every
dollar you have is being devalued.

The greatest threat facing America today is not terrorism, or foreign
economic competition, or illegal immigration. The greatest threat
facing America today is the disastrous fiscal policies of our own
government, marked by shameless deficit spending and Federal Reserve
currency devaluation. It is this one-two punch-- Congress spending
more than it can tax or borrow, and the Fed printing money to make up
the difference-- that threatens to impoverish us by further destroying
the value of our dollars.

The Fed's inflationary policies hurt older people the most. Older
people generally rely on fixed incomes from pensions and Social
Security, along with their savings. Inflation destroys the buying
power of their fixed incomes, while low interest rates reduce any
income from savings. So while Fed policies encourage younger people to
overborrow because interest rates are so low, they also punish thrifty
older people who saved for retirement.

The financial press sometimes criticizes Federal Reserve policy, but
the validity of the fiat system itself is never challenged. Both
political parties want the Fed to print more money, either to support
social spending or military adventurism. Politicians want the printing
presses to run faster and create more credit, so that the economy will
be healed like magic- or so they believe.

Fiat dollars allow us to live beyond our means, but only for so long.
History shows that when the destruction of monetary value becomes
rampant, nearly everyone suffers and the economic and political
structure becomes unstable. Spendthrift politicians may love a system
that generates more and more money for their special interest
projects, but the rest of us have good reason to be concerned about
our monetary system and the future value of our dollars.

By Ron Paul
http://www.house.gov/paul/tst/tst2007/tst040907.htm