FILE – July 26, 2023, Federal Reserve Chairman Jerome Powell appears on a video monitor on the floor of the New York Stock Exchange in New York. Most analysts expect the central bank to keep its benchmark interest rate unchanged when the Federal Reserve ends its two policy rates. -The daily interest rate policy meeting will be held on Wednesday, January 31, 2024. (AP Photo/Seth Wenig, File)
According to the Federal Reserve, credit card delinquencies will increase by 50% in 2023, increasing consumer debt to $17.5 trillion. A recent study by Clever Real Estate found that three in five Americans have credit card debt, and 23 percent of Americans increase their credit card debt each month. The survey also found that 48 percent of Americans (including 59 percent of millennials) use credit cards for essential living expenses.
Overreliance on credit cards and the resulting increase in consumer debt is a result of the fiat currency system. Since Richard Nixon severed the last link between the dollar and gold in August 1971, the value of the dollar has fallen by 87 percent, based on the government’s conservatively released consumer price index figures. This means that even though Americans’ nominal wages have increased, their real wages have decreased because fewer dollars are being purchased.
The continued decline in the value of the dollar has made it impossible for many Americans to accumulate meaningful savings. Americans who can save can actually lose money by doing so, thanks to the Federal Reserve’s inflation tax that erodes the value of their savings. For this reason, Congress feels it is necessary to create tax incentives to encourage people to save for things like retirement, education, and health care.
Congress could protect Americans from inflation taxes by prohibiting the Federal Reserve from purchasing government bonds such as Treasury bills. However, such a bill is unlikely to pass because it would prevent Congress from running large budget deficits and force cuts to the welfare war state.
The reliance on credit cards for so many Americans is one reason why so many Americans are dissatisfied with the economy. High levels of consumer debt also prevent the Federal Reserve from raising interest rates closer to free market levels. The problem is further exacerbated by the fact that investors and businesses rely on near-zero or zero interest rates. The Fed’s relatively modest interest rate hikes over the past few years have led many “experts” to warn that the Fed could push the economy into recession. But the Fed was able to argue that a recession was avoided because the Fed kept interest rates relatively low and government statistics were manipulated to underestimate real unemployment and inflation.
The Fed cannot keep interest rates low indefinitely without triggering a dollar crisis. This will be caused by or result from the rejection of the dollar’s status as the world’s reserve currency. At that point, interest rates will skyrocket, and consumers and businesses that have relied on debt to cope with the Fed’s destruction of the dollar will find themselves faced with a piper demanding payment.
The economic crisis is compounded by a moral crisis caused by the belief among too many Americans at all levels of society that they are entitled to the economic security provided by the government at the expense of their fellow citizens. will do. The result is violence and the expansion of authoritarian political movements.
The collapse of the fiat system and the resulting welfare war state provides an opportunity for those of us who understand the truth to build a society based on the principles of freedom. We must continue our efforts to reach a critical mass of people with the message of freedom, while planning to ensure that families can cope on their own when the next crash occurs.
Dr. Ron Paul is a former member of Congress.this article Written for and published by the Ron Paul Institute for Peace and Prosperity.