Interest Rates Are Prices

One of the most enduring myths in the United States is that this country has a free market, when in reality, the market is merely the structural shell of formerly free institutions. Government pulls the strings behind the scenes. No better illustration of this can be found than in the Federal Reserve's manipulation of interest rates. The Fed has interfered with the proper function of interest rates for decades, but perhaps never as boldly as it has in the past few years through its policies of quantitative easing. In Chairman Bernanke's most recent press conference he stated that the Fed wishes not only to drive down rates on Treasury debt, but also rates on mortgages, corporate bonds, and other important interest rates. Markets greeted this statement enthusiastically, as this means trillions more newly-created dollars flowing directly to Wall Street. 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. Since demand for funds has increased, but the supply is not being increased, the only way to match the shortfall is to continue to create new credit. But this process cannot continue indefinitely. At some point the capital projects funded by the new credit are completed. Houses must be sold, mines must begin to produce ore, factories must begin to operate and produce consumer goods. But because consumption patterns have either remained unchanged or have become more present-oriented, by the time these new capital projects are finished and begin to produce, the producers find no market for their goods. Because the coordination between savings and consumption was severed through the artificial lowering of the interest rate, both savers and borrowers have been signaled into unsustainable patterns of economic activity. Resources that would have been used in productive endeavors under a regime of market-determined interest rates are instead shuttled into endeavors that only after the fact are determined to be unprofitable. In order to return to a functioning economy, those resources which have been malinvested need to be liquidated and shifted into sectors in which they can be put to productive use. 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. We live today not in a free market economic system but in a "mixed economy", marked by an uneasy mixture of corporatism; vestiges of free market capitalism; and outright central planning in some sectors. Each infusion of credit by the Fed distorts the structure of the economy, damages the important role that interest rates play in the market, and erodes the purchasing power of the dollar. Fed policymakers view themselves as wise gurus managing the economy, yet every action they take results in economic distortion and devastation. Unless Congress gets serious about reining in the Federal Reserve and putting an end to its manipulation, the economic distortions the Fed has caused will not be liquidated; they will become more entrenched, keeping true economic recovery out of our grasp and sowing the seeds for future crisis. Note from me: this is from Dr. Ron Paul's Congressional website: "Texas Straight Talk" Note: You can write in Dr. Paul's name when you vote for him in November for the office of President of the United States.

In Praise of Private Charity

Countless organizations within the United States are run with the sole purpose of helping others. Dr. Paul visited one of these organizations and relates his observations in the following article. The organization is not associated with the government but the article is from Dr. Paul's gov. site.
Check out the organization for yourself.


Texas Straight Talk From Ron Paul

In Praise of Private Charity

One of the great fallacies of our time is that if government doesn't do something, no one will. Its corollary is that if you are opposed to the government doing something, that you are opposed to anyone performing that function at all. These disastrous fallacies color much of our national debate concerning heath care, education, poverty, housing, and disaster relief, and other issues.
This Easter season, I would like to applaud an organization that proves just how much private charity can accomplish without government mandates or intrusion. Convoy of Hope, based in Springfield, Missouri is equal parts grocer, clothier, heath care provider, first responder, educator, and logistics expert. It works with communities across America and around the world, bringing together other local charities, businesses, churches, and government agencies to alleviate poverty and help people in the wake of disasters. The tremendous scope of its activities serves as a reminder that government is neither the sole, nor the best, provider of goods and services to people in need.
I recently had the privilege of touring Convoy of Hope's headquarters and distribution center. It was a humbling but encouraging experience. Frankly, I've never seen an organization so focused, efficient, and poised to do so much good for so many people.
Convoy of Hope was founded by Hal and David Donaldson in 1994, who, as young boys suffered the death of their father and subsequent poverty. Both men were struck by the outpouring of support their family received during that time from local churches and the community. As a result, the two brothers developed a deep sense of responsibility to helping others in need. Convoy of Hope has since helped more than 50 million individuals in more than 100 countries-- giving away nearly $300 million worth of food and supplies in the process.
They typically spend only about 10% of their budget on overhead while employing a small staff of approximately 85 people. Watchdog group Charity Navigator consistently gives Convoy of Hope high marks for both its financial acumen and transparency.
Convoy of Hope also stretches its resources by developing strategic partnerships with private sector corporations, including Coca Cola, Nestle, Proctor & Gamble, Georgia Pacific, Cargill, Del Monte, and FedEx. These corporate donors donate everything from building supplies to bottled water to toiletries. Its massive distribution center and headquarters are centrally located in Missouri, where its fleet of trucks can dispatch quickly to any location in America. It also operates six international distribution centers for logistical efficiency.
The next step for Convoy of Hope is an audacious one: a 50 state tour beginning in May designed to address poverty across the United States. The "Convoy of Hope Tour" will provide an average of $1 million in goods and services to a community in a single day. Convoy of Hope's fleet of 18 wheel trucks will roll through every state, providing a wide variety of goods and practical services to those in need, including groceries, job counseling, clothing, dental care, breast cancer screenings, haircuts, family portraits, children's activities, as well as prayer and connections with local churches.
Convoy of Hope is doing tremendous work on behalf of mankind. I wish everyone at Convoy of Hope great success with their upcoming tour. It's hard to imagine a government agency operating as efficiently, as nimbly, or as cheerfully as Convoy of Hope. I truly believe it should serve as a model for private, voluntary, nongovernmental solutions to poverty and disaster relief in our communities.