The following is (also) a case against the calls for dissolution of central banks worldwide.
Ron paul's analysis of the financial crisis is unsophisticated and his understanding of economics superficial . His contrived contrarian views seem to be an attempt to gain public office. TO EQUATE the Fed's lending operations to the tune of 5 trillion dollars to the treasury and the major banks in exchange for underperforming-nevertheless-undervalued securities WITH an equivalent increase in deficit is intellectually puerile .
"Fed in it's history of lending to financial institutions hasn't lost a single cent" says Ben Bernanke.
The aforementioned claim was expressed at a documented Financial Services house committee hearing so Bernanke ran the risk of indictment for perjury had he been dishonest.
And as the chairman further accurately points out the FED has been a profit center for the US Government in the years since the recession. They have bought bad assets at bargain prices in the throes of the recession from desperate banks, assets whose values have since recovered enabling the FED to earn healthy profits which the central bank has subsequently turned over to the US government.
The Great depression achieved the intensity it did because of a collapse of the credit markets. Therefrom comes the need to inject markets with "easy" cash during times of financial distress. Easy cash is not the same as free cash. The term Easy cash implies that the terms of the loans extended to banks to ensure financial stability are favorable for the debtors. As far as lending money to consumers is concerned there isnt a precedent for the effectiveness of such a strategy whereas there are several for cash infusions to financial firms. Theoretically the latter approach could work . But as the chairman of the Federal Reserve , would you really want to take that risk? I wouldnt! Call me risk averse!
The sentence in italics in the foregoing passage summarizes one of the most unequivocal conclusions of Ben Bernankes academic research on the depressions and recessions of decades past.