Political Murders in Kiev, US Troops to Ukraine – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
April 22, 2015
Last week two prominent Ukrainian opposition figures were gunned down in broad daylight. They join as many as ten others who have been killed or committed suicide under suspicious circumstances just this year. These individuals have one important thing in common: they were either part of or friendly with the Yanukovych government, which a US-backed coup overthrew last year. They include members of the Ukrainian parliament and former chief editors of major opposition newspapers.While some journalists here in the US have started to notice the strange series of opposition killings in Ukraine, the US government has yet to say a word.Compare this to the US reaction when a single opposition figure was killed in Russia earlier this year. Boris Nemtsov was a member of a minor political party that was not even represented in the Russian parliament. Nevertheless the US government immediately demanded that Russia conduct a thorough investigation of his murder, suggesting the killers had a political motive.As news of the Russian killing broke, Chairman of the House Foreign Affairs Committee Ed Royce (R-CA) did not wait for evidence to blame the killing on Russian president Vladimir Putin. On the very day of Nemtsov’s murder, Royce told the US media that, “this shocking murder is the latest assault on those who dare to oppose the Putin regime.”Neither Royce, nor Secretary of State John Kerry, nor President Obama, nor any US government figure has said a word about the series of apparently political murders in Ukraine.

On the contrary, instead of questioning the state of democracy in what looks like a lawless Ukraine, the Administration is sending in the US military to help train Ukrainian troops!

Last week, just as the two political murders were taking place, the US 173rd Airborne Brigade landed in Ukraine to begin training Ukrainian national guard forces – and to leave behind some useful military equipment. Though the civil unrest continues in Ukraine, the US military is assisting one side in the conflict – even as the US slaps sanctions on Russia over accusations it is helping out the other side!

As the ceasefire continues to hold, though shakily, what kind of message does it send to the US-backed government in Kiev to have US troops arrive with training and equipment and an authorization to gift Kiev with some $350 million in weapons? Might they not take this as a green light to begin new hostilities against the breakaway regions in the east?

The Obama administration is so inconsistent in its foreign policy. In some places, particularly Cuba and Iran, the administration is pursuing a policy that looks to diplomacy and compromise to help improve decades of bad relations. In these two cases the administration realizes that the path of confrontation has led nowhere. When the president announced his desire to see the end of Cuba sanctions, he stated very correctly that, “…we are ending a policy that was long past its expiration date. When what you’re doing doesn’t work for fifty years, it’s time to try something new.”

So while Obama is correctly talking about sanctions relief for Iran and Cuba, he is adding more sanctions on Russia, backing Saudi Arabia’s brutal attack on Yemen, and pushing ever harder for regime change in Syria. Does he really believe the rest of the world does not see these double standards? A wise consistency of non-interventionism in all foreign affairs would be the correct course for this and future US administrations. Let us hope they will eventually follow Obama’s observation that, “it’s time to try something new.”

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.


Will the Fed Let Innovation Work Its Magic? – Article by Edin Mujagic

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The New Renaissance Hat
Edin Mujagic
April 21, 2015


Sometimes one finds true gems in one’s archives. Recently I came across a speech by then-chairman of the Fed, Ben Bernanke, from May 18, 2013. It was the commencement speech at Bard College at Simon´s Rock, in Great Barrington, Massachusetts. In it, Bernanke chose to forget for a while the dire straits the Western economy is in and focused on prospects for economic growth in the long run, which he defined as “measured in decades, not months or quarters.”

In short, Bernanke focused on scientific and technological progress, more commonly described as innovation. He envisaged a fourth wave of innovation — the first three being the early industrial era (mid-1700s until mid-1800s), the modern industrial era (from 1880 onwards), and the IT-revolution.

His commencement speech was a speech of hope and of encouragement. But Bernanke did not tell the whole story. The then-Fed chairman failed to mention that living standards will depend on more than innovation. At least as important is the role of the very institution he chaired, the Federal Reserve, and what it does or does not do. If it allows high inflation to take hold — either through action or inaction — that would annihilate a very substantial part of the increase in living standards due to innovation.

And yet, recent history strongly suggests that the Fed will end up destroying a large part of the increase in living standards of those graduates Bernanke was speaking to. For example, at the beginning of 2013 Bernanke spoke at another American college. During the Q&A session, he said that “the worst mistake the Fed can make is to tighten monetary policy too soon.” In other words, the then-chairman essentially promised to raise interest rates too late. Nowadays, Bernanke may be gone from the Fed, but his line of thinking on monetary policy certainly has not, and indeed, this line of thinking reflects dominant Fed policy well beyond the Bernanke years.

Innovation and Living Standards

Bernanke, like Greenspan before him, is counting on innovation to keep the economy moving. As well he should. Technological innovation often leads to more efficient production and greater worker productivity which leads to higher wages and more affordable goods.

But if Bernanke is going to tell students that technology will make their lives better, he should also mention the role that he himself and other central bankers play in stifling the positive effects of innovation.

We can see multiple examples of this phenomenon in recent decades. For example, if we consider the effect that China’s entrance into the global economy should have had on living standards in the US, we find the actual results to be somewhat underwhelming. We should have witnessed growth in living standards similar to what we witnessed toward the end of the nineteenth century as the US industrialized. But in fact, the record of growth in real wealth in the US has been disappointing at best.

For example, technological progress due to the Industrial Revolution and globalization in the late nineteenth century led to continuous deflation in the US, and hence unprecedented increases in welfare. Research by Michael Bordo at Rutgers, shows that on average, prices fell by 1.2 percent each year between 1870 and 1896. Real living standards increased substantially over the same time period. Labor market economists in the United States have been able to reconstruct wage development in the United States since 1830. In every decade the real wage was higher than the preceding decade. That is, until the 1970s.

In contrast, in the decades since the early 1980s, as Asia was joining the world with its own industrial revolution, each year prices increased in the US by more than 2 percent. According to the statistics available from US Census, real median household income in the United States (i.e., income adjusted for inflation) barely moved between 1980 and 2012. This is odd, given the fact that economic growth averaged some 3 percent per annum and labor productivity soared by some 50 percent in total. A working American male earned approximately $48,000 in 1969. Adjusted for inflation, his income had barely grown by the time the current economic crisis started.

The main difference between the two periods is that in 1800s there was no Federal Reserve, and the money supply, while certainly not completely non-inflationary, was restrained by the absence of a central bank.

Lost Opportunities

In an unhampered market, technological progress, innovation, and globalization in the decades before the current crisis should have led to three things: slower wage growth, larger profits, and lower prices. In other words, what firms like Apple accomplished (i.e., the creation of innovative, labor-saving products made available at ever-lower prices) on a micro scale, should have happened on the macro-level as well. Slower wage growth would have been inevitable because of increased global competition in the labor market and the constant and increasing threat of jobs being offshored. Larger profits would have occurred economy-wide because of this fact, and the fact that production costs fell. And finally, lower prices would have spread throughout the economy because, due to technological progress, globalization, falling wages, and falling transportation costs.

The first two effects manifested themselves. As mentioned, real income barely budged in the last few decades in the United States. This becomes evident when we take a look at the total employee compensation in the United States. Measured as a share of GDP, US wages in recent years have been lower than during any other period since World War II. At the end of the war, the ratio was 53.6 percent. Nowadays, we find it below 45 percent.

Moreover, as a rule of thumb, the lower the share of wages in any country’s GDP, the higher the share of profits. So we find the second effect evident as well: profits increased.The third effect, however, falling prices, has been largely prevented by the intervention of the central bank. In fact, the Fed aimed for, and continues to aim for some 2 percent inflation per annum. The Fed has been very successful in preventing prices from falling even when the downward pressure on prices was strong, due to the aforementioned combination of technological progress, innovation, globalization, and free trade.

In more than a century before the inception of the Fed in 1913, cumulative inflation in the United States was approximately 0 percent. Between January 1, 1914 and July 2013, cumulative inflation in the United States stood at 2,236 percent, prompting Milton Friedman to write — way back in 1988 —that “no major institution in the US has so poor a record of performance over so long a period, yet so high a public reputation.”

A logical consequence of any “fourth wave” of innovation should be deflation, or falling prices. Then and only then will the living standards of those graduates who were listening to Bernanke indeed increase strongly. It will not happen as long as the Fed continues to aim for inflation every year and certainly not if the Fed continues to follow its current policy that will, according to many, cause even higher inflation in years to come.

Edin Mujagic has a Master’s degree in macro and monetary economics from Tilburg University (The Netherlands) and is an independent macro-economist and author of Money Murder: How the Central Banks Are Destroying Our Money (published in Dutch, as Geldmoord). He is the youngest-ever member of the Monetaire Kring (Monetary Circle) in the Netherlands, a by-invitation-only policy forum of university professors and senior officials at the central bank, ministry of Finance, banks, pension funds and other financial institutions.

This article was published on and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.


Protein Modification as a Biomarker of Aging – Article by Reason

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The New Renaissance Hat
April 19, 2015

The development of fairly consistent, accurate means to measure biological age – as opposed to chronological age – from a tissue sample is an important thread in aging research. Aging is a process of damage accumulation, and rejuvenation would be achieved through damage repair. Research and development aimed at significant extension of healthy life span can only become cost-effective given good ways to measure damage, however. There must be some reliable means to quickly assess the results of a treatment that claims a degree of rejuvenation through the partial repair of a specific form of cellular or molecular damage. In some cases this might seem easy. Take senescent cell clearance, for example: you run the therapy in mice, and compare a range of measures known to scale by senescent cell count in tissue samples before and after the treatment regimen. However, all that really tells you is how well the therapy clears senescent cells. All aspects of biology interact with one another, and age is a global phenomenon. To determine how aged an individual is and how effective a treatment might be when it comes to the practical outcome of additional healthy life span added there is presently little to be done other than wait and see.

The biggest challenge in the development of life-extending therapies is funding and cost. On the one hand there is far too little funding directed towards finding ways to treat aging. On the other hand effectively evaluating an alleged means of treating aging currently requires lifespan studies, and even in mice that takes far too long and costs far too much to be done casually. If there were standardized, quick and easy markers of physiological age that could be assessed before and after a treatment, then this research and development might be able to proceed ten times as rapidly, and evaluation of possible therapies would be open to far more research groups. There are many, many more laboratories with the capacity and funding to carry out a speculative $100,000 study versus a speculative $1,000,000 study.

All of this is to explain why there is considerable interest in developing a cheap biomarker of aging that can reliably assess physiological age from a tissue sample. No-one wants to run a five-year mouse study if there is a ten-minute alternative that produces an answer of about the same accuracy. That ten-minute alternative doesn’t yet exist, but some lines of research seem promising, such as work on DNA methylation patterns that appear to be fairly consistent among individuals over the course of aging. There is also the suggestion that the approach should be to measure the fundamental forms of damage thought to cause aging – but all of them, not just the one being treated by the therapy under consideration. At the present time that might be more onerous than finding a good set of secondary consequences that are reactions to damage, such as epigenetic changes.

The open-access paper linked below covers a fairly wide range of topics. The structures of our cells and tissues are built of proteins, and these proteins are constantly damaged and replaced. Many varied mechanisms toil constantly to remove proteins and cellular components as soon as they show damage or dysfunction. Nonetheless the difference between young tissue and old tissue is that old tissues have far more damage: misfolded proteins, malfunctioning structures inside cells, metabolic waste products such as advanced glycation endproducts (AGEs) gumming together structures in between cells, and so on and so forth. The damage leaks through, and even damage repair mechanisms are not invulnerable; they falter with age due to much the same set of issues as causes dysfunction elsewhere. In the future repair technologies, such as those outlined in the SENS proposals, will bring about rejuvenation by reversing these forms of damage. Since these issues are a part of full set of causes of aging, they are also potential markers of aging.

Protein modification and maintenance systems as biomarkers of ageing

Changes in the abundance and post-translational modification of proteins and accumulation of some modified proteins have been proposed to represent hallmarks of biological ageing. Non-enzymatic protein glycation is a common post-translational modification of proteins in vivo, resulting from reactions between glucose or its metabolites and amino groups on proteins, this process is termed “Maillard reaction” and leads to the formation of advanced glycation endproducts (AGEs). During normal ageing, there is accumulation of AGEs of long-lived proteins such as collagens and several cartilage proteins. AGEs, either directly or through interactions with their receptors, are involved in the pathophysiology of numerous age-related diseases, such as cardiovascular and renal diseases and neurodegeneration.
Beside protein glycation, it is also well known that levels of oxidised proteins increase with age, due to increased protein damage induced by reactive oxygen species (ROS), decreased elimination of oxidized protein (i.e. repair and degradation), or a combination of both. Since the proteasome is in charge of both general protein turnover and removal of oxidized protein, its fate during ageing has received considerable attention, and evidence has been provided for impairment of the proteasome function with age in different cellular systems. Thus, these protein maintenance systems may also be viewed as potential biomarkers of ageing.
It is expected that a combination of several biomarkers will provide a much better tool to measure biological age than any single biomarker in isolation. For the most part, the markers based on proteins and their modifications that have been chosen are directly related with mechanistic aspects of the ageing process. Indeed, they are relevant to such important physiological features such as protein homeostasis and glycoprotein secretion that have been previously documented as being altered with age. Therefore, it is expected that they may be less influenced by other factors not necessarily related with ageing.
Reason is the founder of The Longevity Meme (now Fight Aging!). He saw the need for The Longevity Meme in late 2000, after spending a number of years searching for the most useful contribution he could make to the future of healthy life extension. When not advancing the Longevity Meme or Fight Aging!, Reason works as a technologist in a variety of industries. 

This work is reproduced here in accord with a Creative Commons Attribution license. It was originally published on


Michel Chevalier’s Case Against the Patent System – Article by Louis Rouanet

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The New Renaissance Hat
Louis Rouanet
April 17, 2015

Michel Chevalier (1806–1879) was a very influential French economist during the second half of the nineteenth century. He is still widely known in France for being the architect of the Cobden-Chevalier Treaty of 1860 which was the free-trade agreement between France and Great Britain. Michel Chevalier is, however, less known for his major contribution to the intellectual property debate. [1] Contrary to Jean Baptiste Say, Gustave de Molinari, and many other French economists, Chevalier fiercely opposed the patent system. As Fritz Machlup remarked: “Among French economists, Michel Chevalier was probably the most emphatic in the joint antagonism to tariffs and patents, declaring that both ‘stem from the same doctrine and result in the same abuses.’”

Taking a fresh look at Michel Chevalier’s major work, Les Brevets d’invention (1878), we find it to be not only a well-written and powerful book, but also has remained impressively relevant. The arguments advanced by Chevalier anticipate the current arguments of the present opponents of intellectual property.

Patents as Contrary to Freedom and Economic Progress

Michel Chevalier argues that patents cannot be justified if they are contrary to freedom, even if beneficial to technological change. For him “From the moment we can make effective the patent only through inquisitorial expedients, violence, and subversion of liberty of labor, it is proof that we must renounce patents.” Chevalier rejects utilitarianism as a sufficient method to justify or refute the patent system. Chevalier’s opposition to patents, however, is not just based on moral arguments but shows the disastrous effects of this system for both foreign trade and the economy in general.

According to Chevalier, patents are of the same nature as privileges and monopolies which were prevalent during the Ancien Régime. They are also comparable in their effects to protectionist policies:

In absolute terms, patents diminish the productive power of nations that recognize them: evident proposition for those who believe that freedom, free competition, is the great lever of industrial progress.

Chevalier goes on to note the conservative and anti-innovation nature of monopolies and gives many examples of monopolies during the Ancien Régime. According to him, the innovators during the Ancien Régime weren’t rewarded, not because of the absence of patents, but because of the corporation guild system which was destroying competition and freedom to entry into markets. Thus, the innovators were constantly sued by guilds and consumers rarely benefited from their inventions. This argument is still relevant today. Indeed, companies protected from competition and government-owned corporations are often less innovative and more subject to conservative measures. Sectors typically run by government such as schools experience very little technological progress. On the other hand, the competitive process of the market gives incentives for the actors to differentiate from the other producers. As Pascal Salin stated, the company which makes the highest profits on a free market is the company which is the best positioned to “invent the future.” The essential virtue of competition is that it encourages producers to innovate in order to better serve the needs of consumers.

As one of his more striking examples, Chevalier examines the case of aniline — a dye and major innovation in the chemical industry — and shows how monopoly, resulting from patents, leads to hampered innovation. His interpretation of the problems caused by patents in the chemical industry at the time is consistent with more recent studies done by Boldrin and Levine in Against Intellectual Monopoly, now the seminal work on the topic.

Innovation as a Process

Chevalier understood that innovation is, above all, a process and that giving privileges to the innovator will destroy this process, leading to less and not more inventions. He wrote:

Every industrial discovery is the product of the general ferment of ideas, the result of an internal work which was accomplished with the support of a large number of successive or simultaneous collaborators in society, often for centuries.

This argument regarding the cumulative nature of innovation is still the most powerful argument against intellectual monopoly today and has also been the theme of several recent studies.2 Similar to Chevalier, Hayek saw innovation as a process and stated that “it is not obvious that such forced scarcity [intellectual property] is the most effective way to stimulate the human creative process.”

In an 1862 debate in the Académe des Sciences Morales et Politiques, Chevalier gave the example of Louis Daguerre, one of the inventors of photography, who didn’t seek a patent for his system of photography. According to Chevalier, the absence of a patent led to necessary improvements of the daguerreotype and fostered its widespread use. His conclusion is the following:

The spirit of man proceeds only by successive trials and repeated attempts. Discoveries do not arrive with a single bound to the degree of perfection or completion, which is reserved for them; there must be renewed, persevering efforts, cut by breaks that allow, so to speak, to breath. … If it is true that the invention must pass through the hands of twenty people before reaching its final state, it follows that the exclusive privilege granted to the first patented, and to each of his followers, prevents this practical result rather than facilitate it.

The Increasing Number of Patents and Negative Consequences

Already during the nineteenth century, legal instability and uncertainty challenged the actual efficiency of the patent system and the economists were very much aware of this problem. Chevalier warned that the patent system would lead to legal uncertainty for the companies and would lead the industry back to a guild system where no entrepreneur would dare to enter a market for fear of being sued by patent holders. Chevalier was ahead of his time by denouncing what can be considered the ancestors of today’s patent trolls.

Chevalier concluded his 1862 article by stating: “I think I have said enough to show that the patent legislation has been an eccentricity of the legislator.” He went further in 1863 and added that “[a]ll friends of industrial and social progress must work together to rescue the industry of obstacles, obsolete remains of the past. Patents must disappear first.” [3]

1. Fritz Machlup and Edith Penrose briefly discussed Michel Chevalier in “The Patent Controversy in the Nineteenth Century,” Journal of Economic History, 1950.

2. See Alberto Galasso et Mark Schankerman, “Patents and Cumulative Innovation: Causal Evidence from the Courts”, NBER working paper, 21 June 2014 ; and also, Alessandro Nuvolari, “Collective Invention during the British Industrial Revolution: The Case of the Cornish Pumping Engine,” Cambridge Journal of Economics 28, No. 3 (2004).

3. Quoted in Eugène Pouillet, “Traité théorique et pratique des brevets d’invention et de la contrefaçon,” 1909, pp. x–xi.

Louis Rouanet is a student at Sciences Po Paris (Institute of Political Studies) where he studies economics and political science.

This article was originally published by the Ludwig von Mises Institute. Permission to reprint in whole or in part is hereby granted, provided full credit is given.


Tomorrow Will Be Different From Today – Article by Reason

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The New Renaissance Hat
April 16, 2015

We live in an era of very rapid change driven by technological progress. Today’s world is enormously different from that of three or four decades past: consider the pervasive effects of the revolution in communications and computing technologies that has taken place over that time. Yet, human nature being what it is, most of the people who lived through this profound shift in capabilities and culture are nonetheless very skeptical of claims that the future will look radically different from today in any important aspect. It is strange.

In particular the concept of actuarial escape velocity leading to thousand-year life spans is a very hard sell. People look at the large number that is very different from today’s maximum life span and immediately reject it out of hand, no matter the reasonable argument behind it. Any medical technology that produces some rejuvenation in old patients buys extra time to develop better means of rejuvenation. At some point the first pass at rejuvenation treatments will improve such that remaining healthy life expectancy grows at more than a year with each passing year. At that point life spans will become indefinite, limited only by accident or rare medical conditions not yet solved.

It doesn’t help that most of the public has very little knowledge of the present state of medical research in any field, never mind the specific details of how aging might be treated and brought under medical control. The only solution to that issue is to keep on talking: educate, advocate, and spread the word.


It is likely the first person who will live to be 1,000 years old is already alive today. This is according to a growing regiment of researchers who believe a biological revolution enabling humans to experience everlasting youthfulness is just around the corner. At the epicentre of the research is Aubrey de Grey, co-founder or the California-based Strategies for Engineered Negligible Senescence (SENS) Research Foundation.

“The first thing I want to do is get rid of the use of this word immortality, because it’s enormously damaging, it is not just wrong, it is damaging. It means zero risk of death from any cause – whereas I just work on one particular cause of death, namely ageing.” de Grey said his research aims to undo the damage done by the wear and tear of life, as opposed to stopping the ageing process altogether. “If we ask the question: ‘Has the person been born who will be able to escape the ill health of old age indefinitely?’ Then I would say the chances of that are very high. Probably about 80 per cent.”

“The therapies that we are working on at the moment are not going to be perfect. These therapies are going to be good enough to take middle age people, say people aged 60, and rejuvenate them thoroughly enough so they won’t be biologically 60 again until they are chronologically 90. That means we have essentially bought 30 years of time to figure out how to re-rejuvenate them when they are chronologically 90 so they won’t be biologically 60 for a third time until they are 120 or 150. I believe that 30 years is going to be very easily enough time to do that.”


Reason is the founder of The Longevity Meme (now Fight Aging!). He saw the need for The Longevity Meme in late 2000, after spending a number of years searching for the most useful contribution he could make to the future of healthy life extension. When not advancing the Longevity Meme or Fight Aging!, Reason works as a technologist in a variety of industries. 

This work is reproduced here in accord with a Creative Commons Attribution license. It was originally published on


A Portrait of the Classical Gold Standard – Article by Marcia Christoff-Kurapovna

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The New Renaissance Hat
Marcia Christoff-Kurapovna
April 15, 2015

“The world that disappeared in 1914 appeared, in retrospect, something like our picture of Paradise,” wrote the economist Cecil Hirsch in his June 1934 review of R.W. Hawtrey’s classic, The Art of Central Banking (1933). Hirsch bemoaned the loss of the far-sighted restraint that had once prevailed among the “bankers’ banks” of the West, concluding that modern times “had failed to attain the standard of wisdom and foresight that prevailed in the 19th century.”That wisdom and foresight was once upon a time institutionalized throughout an international monetary culture — gold-based, wary of credit, and contemptuous of debt, public or private. This world included central banks including the Bank of England, the Bank of France, the Swiss National Bank, the early Federal Reserve, the Imperial Bank of Austria-Hungary, and the German Reichsbank. But the entrenched hard-money ideology of the time restrained all of them. The Bank of Russia, for example, which once required 50 percent to 100 percent gold backing of all notes issued, possessed the second largest gold reserves on the planet at the turn of the twentieth century.

“The countries that were tied together in the gold standard system represented to a not inconsiderable degree a community of interest in and responsibility for the maintenance of economic and financial stability throughout the world,” recounted Aldoph C. Miller, member of the Federal Reserve Board from 1914 to 1936, in The Proceedings of the Academy of Political Science, in May 1936. “The gold standard was the one outstanding symbol of unity and economic solidarity which the nineteenth century world had developed.”

It was a time when “automatic market forces,” as economists of the day referred to them, prevailed over monetary management. Redeemability of money in (fine) gold ensured, within limits, stability in foreign exchange rates. Credit was extended only as far as reserve ratios would allow, and central banks were required to keep fixed reserves of gold against notes-in-circulation and against demand deposits.

When Markets Dominated Monetary “Policy”

Gold flows regulated international price relationships through markets, which adjusted themselves accordingly: prices rose when there was an influx of gold — for example, when one country received a debt payment from another country (always in gold), or during such times as the California or Australian gold rushes of the 1870s. These inflows meant credit expansion and a rise in prices. An outflow of gold meant credit was contracted and price deflation followed.

The efficiency of that standard was not impeded by the major central banks in such a way that “any disturbance of economic or financial character originating at any point in the world which might threaten the continued maintenance of economic equilibrium was quickly detected by foreign exchanges,” Miller, the Federal Reserve board member, noted in his paper. “In this way, the gold standard system became in a very real sense a regime or rule of economic health, a method of catching economic disturbances in the bud.”

The Bank of England, the grand master of them all, was the financial center of the universe, whose tight handle on its credit policies was so disciplined that the secured the top spot while not even holding the largest gold reserves. Consistent in its belief that protection of reserves was the chief, and only important, criterion of credit policy, England became the leading exporter of capital, the free market for gold, the international discount market, and international banker for the trade of other countries, as well as her own. The world was in this sense on the sterling standard.

The Bank of France, wisely admonished by its founder, Napoleon, to make sure France was always a creditor country, was so replete with reserves it made England a 500 million franc loan (in 1915 numbers) at the onset of the World War I. Switzerland, perhaps the last “19th-century-style” hold-out today with unlimited-liability private bankers and strict debt-ceiling legislation, also required high standards of its National Bank, founded in 1907. By the 1930s that country had higher banking reserves than the US; the Swiss franc was never explicitly devalued, unlike nearly every other Western nation’s currency, and the country’s domestic price level remained the most stable in the world.

For a time, the disciplined mindset of these banks found its way across the Atlantic, where the idea of a central bank had been long the subject of hot debate in the US. The economist H. Parker Willis, writing about the controversy in The Journal of the Proceedings of the Academy of Political Science, October 1913, admonished: “The Federal Reserve banks are to be ‘bankers’ banks,’ and they are intended to do for the banker what he himself does for the public.”

At first, the advice was heeded: in September 1916, almost two years after its founding on December 23,1913, the fledgling Fed worked out an amendment to its gold policy on the basis of a very conservative view of credit. This new policy sought to restrain “the undue and unnecessary expansion of credit,” wrote Fed board member Miller, in an article for The American Economic Review, in June 1921.

The Bank of Russia, during the second half of the nineteenth century steered itself through the Crimean War, the Russo-Turkish War, the Russo-Japanese War, impending Balkan wars — not to mention all that was to follow — and managed to emerge with sound fiscal policies and massive gold reserves. According to The Economist of May 20, 1899, Russian holdings were 95 million pounds sterling of gold, while the Bank of France held 78 million sterling worth. (Austria-Hungary held 30 million sterling worth of gold and the Bank of England 30 million sterling worth of both gold and silver.) “Russia up to the very moment of rupture [with Japan, 1904–1905], was working imperturbably at the progressive consolidation of her finances,” reported Karl Helfferich of the University of Berlin, at a meeting of The Royal Economic Society [UK] in December 1904. “Even in years of industrial crises and defective harvest, her foreign trade showed an excess of exports over imports more than sufficient to compensate payments sent abroad. And, as guarantee her monetary system she has succeeded in a amassing and maintaining a vast reserve of gold.”

These banks, in turn, drew on the medieval/Renaissance and Baroque-era banking traditions of the Hanseatic League, the Bank of Venice, and Amsterdam banks. Payment-on-demand “in good and heavy gold” was like a blood-oath binding the banker-client relationship. The transfer of credit “did not arise from any such substitution of credit for money,” noted Charles F. Dunbar, in The Quarterly Journal of Economics of April 1892, “but from the simple fact that the transfer in-bank saved the necessity of counting coin and manual delivery of every transaction.”

Bankers were forbidden to deal in certain commodities, could not make loans or create credit for the purchase of such commodities, and forbade both foreigners and citizens from buying silver on credit unless the same amount in cash was in the bank. According to Dunbar, a Venetian law of 1403 on reserve requirements became the basis of US banking law on the deposits of public securities in the late 1800s.

After the fall of bi-metallism in the 1870s, gold continued to perform monetary functions among the main countries of the Western world (and the well-administered Bank of Japan). It was the only medium of exchange and the only currency with unrestricted legal tender. It became the vaunted “measure of value.” Bank currency notes were simply used as auxiliary to gold and, in general, did not enjoy the privilege of legal tender.

The End of An Era

It was certainly not a flawless system, or without periodic crises. But central banks had to act in an exceptionally prudent manner given the all-over public distrust of paper money.

As economist Andrew Jay Frame of the University of Chicago, writing in The Journal of Political Economy, in January 1912, noted: “During panics in Britain in 1847 and 1866, when cash payments were suspended, the floodgates of cash were opened [by The Bank of England], the governor sent word to the street that solvent banks would be accommodated, and the panic was relieved.” Frame then adds: “However, this extra cash and the increased loans that went with it were very quickly put to an end to avoid credit expansion.”

The US was equally confident of its prudent attitude. Aldoph Miller, writing of Federal Reserve policy, remarked: “The three chief elements of the policy of a central bank or system of reserve holding institutions are best disclosed in connection with the attitude towards 1) gold 2) currency 3) credit.” He noted proudly: “The federal reserve system has met [these] tests on the whole with remarkable success.”

But after World War I, a different international landscape was left behind. England had been displaced as the center of international finance; the US and France emerged as the chief post-war creditor countries. The mechanism of the gold standard to which depreciated currencies could be related no longer existed. Only the US was left with a full gold standard. England and France had a gold bullion standard and other countries (Germany, primarily) had a gold-exchange standard.

A matrix of unbalanced trade relationships began to saturate the international economy. Then, with so many foreign countries attendant upon its speculative boom, the US manipulated its own domestic credit policies to ease credit and exchange-standard controls. This eventually culminated in an international financial crisis of 1931. Under Bretton Woods (1944), the gold standard was effectively abandoned: domestic convertibility was illegal and the role of gold was very constrained in favor of the dollar.

“It was, at least in theory, simple enough in the old days,” wrote a wistful W. Randolph Burgess, head of the New York Federal Reserve, in 1938. “In the present strange new world, where the old gold portents have lost their former meaning, where is the radio beam which the central banker may follow? What is the equivalent of gold?

The men of his era and of the late nineteenth century understood the meaning of such a question and, more importantly, why it is one that must be asked. But theirs was a different world, indeed — one without “QE,” ZIRP,” or “Unknown Knowns” as fiscal policy. And there were no helicopters, either.

Marcia Christoff-Kurapovna is at work on the biography of a prominent European head of state and businessman.  Her work has appeared in such publications as The Wall Street Journal, The Economist and Foreign Affairs.

This article was originally published by the Ludwig von Mises Institute. Permission to reprint in whole or in part is hereby granted, provided full credit is given.


The Ukrainian Regime’s Censorship Spreads West to Canada, and Political Correctness is to Blame – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
April 14, 2015

There is nothing friendly to liberty or to Western values about the government of Petro Poroshenko and Arseniy Yatseniuk in Ukraine – a regime completely incapable of understanding the principle of individual rights or the freedoms of speech, property, and conviction that this principle entails. The Ukrainian government has just enacted a law prohibiting the private expression of Communist symbols and ideology, while elevating to “national hero” status the Ukrainian Insurgent Army of Stepan Bandera, who collaborated with the Nazi army during World War II and committed systematic acts of genocide against Russian, Belarusian, Polish, and Jewish civilians. Bandera serves as an explicit inspiration for the neo-Nazi Right Sector paramilitary organization, whose fighters have been documented by Amnesty International to have committed extensive war crimes against civilians in the Donbass region, and whose leader Dmytro Yarosh now holds a prominent position as advisor to the Ukrainian Commander-in-Chief.

Criticism of Bandera and his Ukrainian Insurgent Army is now illegal in Ukraine. According to UaPosition, a Ukrainian website aimed at informing non-Ukrainians about Ukraine, the text of the law legitimizing Bandera’s thugs reads as follows: “Public denial of the legitimacy of the struggle for the independence of Ukraine in the twentieth century [is] recognized [as an] insult to the memory of fighters for independence of Ukraine in the XX century [and as] disparagement of the Ukrainian people and is illegal.”

As David Boaz put it, “One difference between libertarianism and socialism is that a socialist society can’t tolerate groups of people practicing freedom, but a libertarian society can comfortably allow people to choose voluntary socialism.” No libertarian or even remotely quasi-libertarian society would censor the expression of even the most strident socialist or communist viewpoints. On the other hand, legal censorship of opposing viewpoints was indeed a hallmark of the former Soviet Union. A government that attempts to censor the ideas that, at least ostensibly, animated Soviet policies, becomes just a mirror image of the Soviet regime by adopting the very same policies in essence. In addition, the Ukrainian regime has prohibited films alleged to “glorify” the Russian military and has imprisoned journalists and activists who criticized military conscription, such as Ruslan Kotsaba.

The Poroshenko/Yatseniuk government has assumed the worst characteristics of the former USSR regime without any of its few decent attributes. By validating both historical genocidal ethnic nationalism and its neo-Nazi successor movements, the Ukrainian regime has departed from one of the most important admirable aspects of the post-1941 USSR: its adamant opposition to Nazism and to the plethora of ethnically tinged fascist movements that arose in the wake of Hitler’s invasions of Eastern Europe. Indeed, one of the reasons why so many Soviet subjects of diverse ethnicities acquiesced to the tyranny of Stalin and his successors was the fact that the Soviet regime did act to protect them against the worse threat of genocide by Hitler and his petty nationalist allies. The prohibition on criticism of the Banderites is, in the eyes of many Ukrainians, Russians, and Belarusians, a prohibition on criticism of the armed gangs who murdered or tried to murder their grandparents.

Even more troubling, however, is that the zeal of “pro-Ukrainian” activists in the West is creating a chilling effect on speech and criticism of the Ukrainian regime even in Canada. Valentina Lisitsa, a world-renowned pianist born in Ukraine who became a US citizen and is currently residing in Paris, has become the latest victim of the campaign to silence those who disagree with militant Ukrainian nationalism. Lisitsa’s performances of classical compositions (see and hear examples here, here, here, and here) are completely apolitical and have attracted tens of millions of views on her YouTube channel. She was due to play Rachmaninoff’s Concerto #2 (earlier recordings are here, here, and here) at the Toronto Symphony Orchestra, before her appearance was cancelled at the behest of anonymous Ukrainian nationalist activists, who also fueled a social-media outcry against Lisitsa. The reason? Lisitsa posted on her Twitter account satirical, often scathing criticism of the Ukrainian government and its war against separatists in the Donbass – specifically condemning the neo-Nazi and genocidal strains among the Ukrainian government’s paramilitary supporters. She has remained steadfast in defending her posts as free expression – and rightfully so, as her liberty to express her views does not require those views or the manner of their expression to be inoffensive or universally agreeable to all. Furthermore, any manner of words or imagery she used pales in comparison to the real deaths of over 6,000 civilians (and likely many more) in the Donbass, many at the hands of the Ukrainian army and its allied “volunteer” paramilitary battalions. Lisitsa was outraged at the people and policies that brought about the deaths of these innocents, and she was right to proclaim her outrage.

But whether or not one agrees with Lisitsa or with the manner in which she expressed her views, her performance of Rachmaninoff had no relationship to any of her political activities – and none of her other classical performances over the course of many years had even the remotest political aspect. By successfully pressuring the Toronto Symphony Orchestra to cancel Lisitsa’s appearance, the Ukrainian nationalist activists recreated in Canada the same politicization of classical music for which Stalin’s Soviet Union was infamous. Some of the most innovative 20th-century composers – including Sergei Prokofiev, Dmitri Shostakovich, and Aram Khachaturian – were often victims of Stalin’s denunciations and sometimes came perilously close to imprisonment or worse. In a free society, it is generally recognized that a person’s artistic prowess and political positions are separate matters unless the artist wishes to intentionally combine the two – as, for instance, in a work of explicitly politically motivated art. Preventing the performance of art that is inherently apolitical, on the grounds of the artist’s outside political activities, creates a chilling effect on both art and peaceful political activism. Artists, fearing that their livelihoods would be denied to them if they became too vocal about current events and ran afoul of one pressure group or another, would be incentivized to stick only to bland, uncontroversial statements or avoid discussing any subjects where significant disagreements might arise. Art would suffer, as works of technical and esthetic merit would become more difficult for audiences to access, given that anybody with controversial political views would be shut out of the talent pool.

The cultural reign of political correctness in the West further exacerbates the threat of the chilling effect on art and speech. The political repression of art in the contemporary West would come not from a top-down decree by a government, but rather due to any sufficiently vocal special interest claiming to be “offended” – not just by an idea contrary to its own agenda, but by the whole person expressing that idea. It then becomes the case that no Stalin is necessary – but the effect is the same: ideologically motivated threats cowing artists into acquiescence to the popular political agenda of the day. A person can become widely denounced, blacklisted, and shut out from opportunities that should be determined by artistic merit alone – not due to any conspiracy, but rather because the typical, middle-of-the-road decision makers in private as well as public institutions become fearful of the special interests’ ire. Political correctness is not primarily a problem of governments, but rather a problem of a deeply broken societal and intellectual culture, where not giving offense is prioritized over the pursuit of truth and justice. In the case of Lisitsa, as usual, the politically correct prohibition on offense results in the most offensive possible ideologies having a free hand to shut down dissenting views. What “offended” fundamentalist Islam has been able to perpetrate in shutting down debate in Europe for over a decade, “offended” Ukrainian nationalism is beginning to inflict in Canada now, often with the vociferous support of media commentators crusading against “hate speech” – a phrase which can mean anything they want it to mean.

The Ukrainian nationalists are able to export their agenda of censorship and intimidation to the West as parasites taking advantage of a weakened host. Political correctness is the disease that renders Western public discourse vulnerable to their arguments, while endangering the vital critical voices who need to be heard in order to prevent a tragic Western-led escalation of the Ukrainian civil war. It seems that the only way the Ukrainian regime and its nationalist allies will be able to render Ukraine more Western is to render the West more like Ukraine. We in the West need to strengthen our defenses and develop an immunity against this incursion of illiberalism by reaffirming the values of individual rights, open discourse and debate on controversial ideas, free expression of dissenting views, and resistance to the dependence of art on political orthodoxy.


The New Militarism – Who Profits? – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
April 14, 2015
Militarism and military spending are everywhere on the rise, as the new Cold War propaganda seems to be paying off. The new “threats” that are being hyped bring big profits to military contractors and the network of think tanks they pay to produce pro-war propaganda. Here are just a few examples:

The German government announced last week that it would purchase 100 more “Leopard” tanks – a 45 percent increase in the country’s inventory. Germany had greatly reduced its inventory of tanks as the end of the Cold War meant the end of any threat of a Soviet ground invasion of Europe. The German government now claims these 100 new tanks, which may cost nearly half a billion dollars, are necessary to respond to the new Russian assertiveness in the region. Never mind that Russia has neither invaded nor threatened any country in the region, much less a NATO member country.

The US Cold War-era nuclear bunker under Cheyenne Mountain, Colorado, which was all but shut down in the 25 years since the fall of the Berlin Wall, is being brought back to life. The Pentagon has committed nearly a billion dollars to upgrading the facility to its previous Cold War-level of operations. US defense contractor Raytheon will be the prime beneficiary of this contract. Raytheon is a major financial sponsor of think tanks like the Institute for the Study of War, which continuously churn out pro-war propaganda. I am sure these big contracts are a good return on that investment.

NATO, which I believe should have been shut down after the Cold War ended, is also getting its own massively expensive upgrade. The Alliance commissioned a new headquarters building in Brussels, Belgium, in 2010, which is supposed to be completed in 2016. The building looks like a hideous claw, and the final cost – if it is ever finished – will be well over one billion dollars. That is more than twice what was originally budgeted. What a boondoggle! Is it any surprise that NATO bureaucrats and generals continuously try to terrify us with tales of the new Russian threat? They need to justify their expansion plans!

So who is the real enemy? The Russians?

No, the real enemy is the taxpayer. The real enemy is the middle class and the productive sectors of the economy. We are the victims of this new runaway military spending. Every dollar or euro spent on a contrived threat is a dollar or euro taken out of the real economy and wasted on military Keynesianism. It is a dollar stolen from a small business owner that will not be invested in innovation, spent on research to combat disease, or even donated to charities that help the needy.

One of the most pervasive and dangerous myths of our time is that military spending benefits an economy. This could not be further from the truth. Such spending benefits a thin layer of well-connected and well-paid elites. It diverts scarce resources from meeting the needs and desires of a population and channels them into manufacturing tools of destruction. The costs may be hidden by the money-printing of the central banks, but they are eventually realized in the steady destruction of a currency.

The elites are terrified that peace may finally break out, which will be bad for their profits. That is why they are trying to scuttle the Iran deal, nix the Cuba thaw, and drum up a new “Red Scare” coming from Moscow. We must not be fooled into believing their lies.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.


Why We Need Deflation and Higher Interest Rates – Article by John P. Cochran

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The New Renaissance Hat
John P. Cochran
April 5, 2015

The Fed is seemingly slightly out of step with other central bankers as it recently hinted at possible future rate hikes in the official announcement following its March 20, 2015 meeting. But as many commentators have recognized, Janet Yellen, a strong proponent of Keynesian more-inflation-as-cure-for-unemployment policy, later downplayed the significance of the announcement. She was careful to indicate that rates would stay low for the near future and when (and if) rate increases begin, they will be measured. The Fed, like central bankers elsewhere, stays committed to a 2 percent inflation target as it continues a policy driven by a fear of deflation, a fear that is not supported by either good economic theory or economic history properly interpreted.

The errors of deflation-phobia can be drawn from Philipp Bagus’s excellent and recently released In Defense of Deflation. Bagus points out

In the economic mainstream, there are basically two main strands in contemporary deflation theories. The first strand can be represented by economists who in some way are inspired by Keynesian theories like Ben Bernanke, Lars E.O. Svensson, Marvin Goodfriend, or Paul Krugman. The first group fears that price deflation might put the economy in a liquidity trap and opposes all price deflation categorically. It represents the deflation phobia in its clearest form.

It is these theorists and their colleagues who currently dominate central bank thinking and make the case (weak and often only asserted as an imperative) for a positive inflation buffer.

Bagus does recognize a second group of mainstream economists with a more balanced view of deflation:

The second strand has representatives like Claudio Borio, Andrew Filardo, Michael Bordo, John L. Lane, and Angela Redish. Inspired by the Chicago School, the second group is more free market oriented. Bordo, for instance, received his doctoral degree from the University of Chicago. This group distinguishes between two types of deflation: good deflation and bad deflation.

Deflation Leads to Increases in Real Interest Rates, Which Brings Recovery

However, the main water carriers against this erroneous overemphasis by economists and the mainstream press on the alleged evils of deflation have been the Austrians. In his essays “A Reformulation of the Austrian Business Cycle Theory” and “An Austrian Taxonomy of Deflation” Joseph Salerno dismantles deflation-phobia and illustrates the benefits of higher interest rates. Moreover, “A Reformulation” is also a strong argument on why current policy retards recovery and why a policy which would allow financial markets to adjust to a new higher natural rate of interest is essential for restoring normalcy and prosperity. Salerno begins with examining why it is so unpleasant when an economy must adjust to fix the malinvestments and overconsumption that appeared in the boom phase:

The ABCT, when correctly formulated, does indeed explain the asymmetry between the boom and bust phases of the business cycle. The malinvestment and overconsumption that occur during the inflationary boom cause a shattering of the production structure that accounts for the pervasive unemployment and impoverishment that is observed during the recession. Before recovery can begin, the production structure must be painstakingly pieced back together again in a new pattern, because the intertemporal preferences of consumers have changed dramatically due to the redistribution and losses of income and wealth incurred during the inflation. This of course takes time.

At the heart of the problem is the fact that central bank-induced inflation has “wreaked havoc” on prices and consequently on economic calculation:

In addition, the recession-adjustment process is further prolonged by the fact that the boom has wreaked havoc with monetary calculation, the very moorings of the market economy. Entrepreneurs have discovered that their spectacular successes during the boom were merely a prelude to a sudden and profound failure of their forecasts and calculations to be realized. Until they have regained confidence in their forecasting abilities and in the reliability of economic calculation they will be understandably averse to initiating risky ventures even if they appear profitable. But if the market is permitted to work, this entrepreneurial malaise cures itself as the restriction of demand for factors of production drives down wages and other costs of production relative to anticipated product prices. The “natural interest rate,” i.e., the rate of return on investment in the structure of production, thus increases to the point where entrepreneurs are enticed to renew their investment activities and initiate the adjustment process. Success feeds on itself, entrepreneurs’ spirits rise, and the recovery gains momentum.

The market can only cure itself, Salerno explains, if prices are allowed to adjust, including decreases in “wages and other costs of production relative to anticipated product prices.” At the same time, it’s the resulting “steep rise” in real interest rates that draws capitalists and entrepreneurs back into the marketplace:

The rise in the natural interest rate that overcomes the pandemic demoralization among capitalists and entrepreneurs and sparks the recovery is reflected in the credit markets. For recovery to begin again, there needs to be a steep rise in the “real,” or inflation-adjusted, interest rate observed in financial markets. High interest rates do not stifle the recovery but are the sure sign that the readjustment of relative prices required to realign the production structure with economic reality is proceeding apace. The mislabeled “secondary deflation,” whether or not it is accompanied by an incidental monetary contraction, is thus an integral part of the adjustment process. It is the prerequisite for the renewal of entrepreneurial boldness and the restoration of confidence in monetary calculation. Decisions by banks and capitalist-entrepreneurs to temporarily hold rather than lend or invest a portion of accumulated savings in employing the factors of production and the corresponding rise of the loan and natural rates above some estimated “true” time preference rate does not impede but speeds up the recovery. This implies, of course, that any political attempt to arrest or reverse the decline in factor and asset prices through monetary manipulations or fiscal stimulus programs will retard or derail the recession-adjustment process.

New Defenders of Deflation

Citing work by Claudio Borio, head of the Monetary and Economic department at the BIS, listed above by Bagus, The Telegraph, ran a recent story by Szu Ping Chan, “Low Rates Will Trigger Civil Unrest as Central Banks Lose Control,” also highly critical of fear-of-deflation policy committed to 2 percent (or higher) inflation targets. Ms. Chan highlights work by Borio:

A separate paper co-authored by Mr Borio argued that periods of deflation has less economic costs than sustained falls in property prices. Its analysis of 38 economies over a period of more than 100 years showed economies grew by an average of 3.2pc during deflationary periods, compared with 2.7pc when prices were rising.

It said drawing blind comparisons with the 1930s were misguided. “The historical evidence suggests that the Great Depression was the exception rather than the rule,” said Hyun Shin, head of research at the BIS.

Mr. Bagus, Ms. Chan, and Mr. Borio have highlighted for us yet again why it is essential that institutional changes be made that lead to withering away of fiat money and create the possibility for sound money.

John P. Cochran is emeritus dean of the Business School and emeritus professor of economics at Metropolitan State University of Denver and coauthor with Fred R. Glahe of The Hayek-Keynes Debate: Lessons for Current Business Cycle Research. He is also a senior scholar for the Mises Institute and serves on the editorial board of the Quarterly Journal of Austrian Economics. Send him mail. See John P. Cochran’s article archives.

This article was published on and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.


Repeal, Don’t Reform the IMF! – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
April 5, 2015
A responsible financial institution would not extend a new loan of between 17 and 40 billion dollars to a borrower already struggling to pay back an existing multi-billion dollar loan. Yet that is just what the International Monetary Fund (IMF) did last month when it extended a new loan to the government of Ukraine. This new loan may not make much economic sense, but propping up the existing Ukrainian government serves the foreign policy agenda of the US government.

Since the IMF receives most of its funding from the United States, it is hardly surprising that it would tailor its actions to advance the US government’s foreign-policy goals. The IMF also has a history of using the funds provided to it by the American taxpayer to prop up dictatorial regimes and support unsound economic policies.

Some may claim the IMF does promote free markets by requiring that countries receiving IMF loans implement some positive economic reforms, such as reducing government spending. However, other conditions imposed by the IMF, such as that the country receiving the loan deflate its currency and implement an industrial policy promoting exports, do not seem designed to promote a true free market, much less improve the people’s living standards by giving them greater economic opportunities.

The problem with the IMF cannot be fixed by changing the conditions attached to IMF loans. The fundamental problem with the IMF is that it is funded by resources taken forcibly from the private sector. By taking resources out of private hands and giving them to IMF bureaucrats, the US federal government distorts the marketplace, harming both American taxpayers and the citizens of the countries receiving the IMF loans. The idea that the IMF is somehow better able to allocate capital than are private investors is just as flawed as every other form of central planning. The IMF must be repealed, not reformed.

The IMF is not the only US institution that manipulates the global economy. Over the past several years, a mysterious buyer, identified only as “Belgium,” so named because the buyer acts through a Belgian-domiciled account, has become the third-largest holder of Treasury securities. Belgium’s large purchases always occur at opportune times for the US government, such as when a foreign country sells a large amount of Treasuries. “Belgium” also made large purchases in the months just after the Fed launched the quantitative easing program. While there is no evidence this buyer is working directly with the US government, the timing of these purchases does raise suspicions.

It is not out of the realm of possibility that the Federal Reserve is involved in these purchases. The limited audit of the Federal Reserve’s actions during the financial crisis that was authorized by the Dodd-Frank Act revealed that the Fed actively intervenes in global markets.

What other deals with foreign governments is the Fed making? Is the Fed, like the IMF, working to bail out Greece and other EU countries? Is the Fed working secretly to aid US foreign policy as it did in the early 1980s, when it financed loans to then-US ally Saddam Hussein? The lack of transparency about the Fed’s dealings with overseas central banks and foreign governments is one more reason why Congress needs to pass the audit the fed bill.

By taking money from American taxpayers to support economically weak and oftentimes corrupt governments, the IMF distorts the market, enriches corrupt governments, and harms both the American taxpayer and the residents of the counties receiving IMF “aid.” It is past time to end the IMF along with all instruments of American interventionist foreign policy.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

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