Talking Numbers - CNBC | Yahoo Finance

Sponsored by
Talking Numbers

Here's why the Fed is trapped: Ron Paul

Talking Numbers

Former congressman Ron Paul discusses the Fed, tapering, emerging markets, and the US economy.

Ron Paul has a warning for the markets: The Federal Reserve Bank is the source of today's market instability and it will likely get worse.

As the Fed begins its two-day policy meeting on Tuesday, world markets are being rattled by two major issues: credit market instability in China and a further taper of the US monetary stimulus.

(Read: Despite selloff, profit anxiety, don't worry: Economists)

Former congressman Ron Paul believes that Ben Bernanke is going to avoid responsibility for additional tapering and foist it on his successor, Janet Yellen. He believes the Fed has its back against the wall – if it tapers any more, emerging markets will spin out of control; if it continues buying bonds at the same monthly pace indefinitely (which is expected to be $75 billion this month), US and world markets could find themselves overvalued and susceptible to a big drop if and when the music stops. The US dollar's role as a reserve currency is part of the reason this could be a global problem, according to Paul.

(Read: CEO of Bitcoin exchange arrested)

"We create money out of thin air to the tune of billions and billions of dollars," says Paul. "Then we spend it in places like China and they monetize that debt. It's a worldwide phenomenon. Everybody has mal-investments and overinvestments and all the problems built-in. The weakest economies are going to crack first. But, eventually, I think everybody's going to suffer from the massive monetary inflation that's been going on, not only for the last 10 years but probably 30 years."

Paul believes the markets will eventually come under pressure. To see what Ron Paul has to say about Janet Yellen, Ben Bernanke, the Fed, emerging markets, and the US economy, watch the video above.

More from Talking Numbers:

This could signal the next leg down for stocks
Here’s why emerging markets are threatening the US
This chart says Icahn is wrong about Apple
________________

Follow us on Twitter: @CNBCNumbers
Like us on Facebook: facebook.com/CNBCNumbers

Rates

View Comments (258)