First up is Ron Paul: His claim on the Government has some merit: we are now beginning to witness the unintended consequences of government winning the battle over the marketplace for control of the economy (the same type of battle that was documented in PBS’s Commanding Heights). The Volker Rule in Dodd/Frank may be responsible for a decrease in  the ability of a bond dealer to hold inventories at investment bank trading desks- thus reducing demand and widening spreads for many types of bonds. This result is counter-productive towards the same goal that lower Fed rates try to achieve: greater lending by the banks. So in this regard, the governments’ punishment of the banks is redolent of a parent beating a child that behaved badly- of course the child has misbehaved and its behavior must be corrected, but perhaps we as a society are resourceful enough to decide upon a corrective action that has greater efficacy. Similar to a severely beaten child for misbehaving, the banks are not only not-misbehaving any more, they are withdrawing from their responsibilities (just like one of the last real cowboys, Buck, was beaten by his father).

His claim against the Fed, however, lacks as much merit: while the blame for easy credit is attributable to the Fed, its pasteurization will render it impotent during crises that require its action. During times of economic war, the Fed needs to use war-time strategies like keeping rates exceptionally low and creating dollar funding facilities to foreign central banks.

Through an examination of his platform, we can make the case that while his marketplace approach to managing the economy has the benefit of reduced unintended consequences, his hard currency policy may not be appropriate for a globalized currency. It should be obvious, but even Winston Churchill made the now unthinkable blunder by reinstating the gold standard for Serling. He was said to have done so not for any contemporary understanding of monetary policy, but because he was partial to the nostalgic effect of Sterling being backed by specie.

Sources: http://www.annaly.com/site/marketcommentary.aspx

http://news.morningstar.com/articlenet/article.aspx?id=397833