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May 6, 2010 www.amazon.com Paul’s opposition to the Federal Reserve is supported by the Austrian Business Cycle Theory, which holds that instead of containing inflation, the Federal Reserve, in theory and in practice, is responsible for causing inflation. In addition to eroding the value of individual savings, this creation of inflation leads to booms and busts in the economy. Thus Paul argues that government, via a central bank (the Federal Reserve), is the primary cause of economic recessions and depressions. He believes that economic volatility is decreased when the free market determines interest rates and money supply. He has stated in numerous speeches that most of his colleagues in Congress are unwilling to abolish the central bank because it funds many government activities. He says that to compensate for eliminating the “hidden tax” of inflation, Congress and the president would instead have to raise taxes or cut government services, either of which could be politically damaging to their reputations. He states that the “inflation tax” is a tax on the poor, because the Federal Reserve prints more money which subsidizes select industries, while poor people pay higher prices for goods as more money is placed in circulation. Paul adheres deeply to Austrian school economics and libertarian criticism of fractional-reserve banking, opposing fiat currency and the inflation thereof; he has written six books on the subjects, has pictures of classical liberal economists …
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