In an effort to steer some of Mr.'s Paul supporters in our direction we'd like to highlight some of the inconsistencies in the argument and suggest that Paul's followers consider the functional finance approach to understanding money.
Lamenting that "Of course, Congress could abolish the Fed tomorrow if it wanted to. The Representatives' ignorance of economics, as well as the benefits they enjoy from irresponsible spending, prevent this." Besides failing to appreciate that public spending occurs within the economy and is therefore income for private sector contractors receiving them including himself as a doctor with Medicare patients is just wrong. Government deficit spending and interest payments are equal to private savings or income.
Private banks create money not central banks
"Only the Federal Reserve can inflate the currency, creating new money and credit out of thin air." The reality is that despite Federal Reserve's best attempts it can't just inflate the currency or pump money into the economy. Low rates, Quantitative Easing and the like are failing to prove sufficient for either full employment or inflation targets because bank lending and private demand for credit hasn't responded. Continually making claims like "Artificially low interest rates are achieved by inflating the money supply" fails to understand the lessons and limitations of monetary policy at the moment.
While we're inclined to hyperbolically jump on banks just as much as the next group Paul is nonsensical in this regard. Claiming that "Manipulating the money supply and interest rates rejects all the principles of the free market, and so it cannot be said that too free a market caused this mess. The market was not free at all. It was manipulated and distorted."
It was exactly the Feds unwillingness to raise rates and bank securitization, selling off of loans made, along with lack of fraudulent lending supervision that led to the crisis. If anything the "market " mispriced the bonds because it had a vested, unsupervised interest in doing so. But since no quack pundit has made his argument completely without blaming regulation or intervention Paul gets his causality wrong.
All Dare Call it a Conspiracy
"Noble intentions are always used to justify the inflation, but the real reasons are far more sinister. Those who get the control over the money are beneficiaries, not the people as a whole." Banks hate inflation preferring the mass unemployment of the population instead. The truth is no investor likes to lose money and people like to make more every year so a bit of inflation is good and healthy especially relative to deflation or the opposite. This sentence makes you think Paul is a full reserve banking type but that would be far too planned an approach. Keep it sinister!
What's your point?
"When the printing presses are available to the government and the banking cartel, they will use them rather than do the right thing." We've read too many pages without an answer to what the right thing is that is sensible in this book.
Understand modern money
More importantly for us we're obligated to highlight Paul's failure to understand the nature of modern money arguing illogically and dangerously for a return to a failed commodity backed money system and sound money policies that are unable to support what presumably Paul is concerned with stable prices.
If any of the End the Fed supporters are looking for effective ways to understand how to manage inflation, promote full employment and better manage the economy and money ou can find them at functionalfinance.org.
*All quotes taken from Ron Paul's book "End The Fed"