(CNSNews.com) - The announcement from the Federal Reserve on Wednesday that it would continue pumping new money into the economy "is a major admission by Bernanke that things aren't good," Former Rep. Ron Paul told MSNBC's "Morning Joe" on Thursday.
"He's literally saying, 'We're in bad shape.'"
The stock market soared on the unexpected news that the Federal Reserve's "quantitative easing" program will continue, even though Bernanke hinted earlier this year that the stimulus program would begin to wind down. (Under quantitative easing policies, the Fed creates new money which is used to buy government bonds and other assets from banks, thereby boosting available capital.)
"I think it was a very, very bad announcement yesterday that the economy is a lot worse off, and I think in time that will prove to be the case," Paul said.
Paul, referring to inflationary pressures, said it's a bad idea to "continue to destroy our currency," because it "always destroys the middle class and the wealthy get wealthier."
"So all inflation is bad, this idea that the Fed can create money out of thin air to satisfy special interests -- and the politicians who like to spend money -- it always leads to trouble, except on the surface a lot of people feel good about it."
Unemployment rate 'well above acceptable levels'
Federal Reserve Chairman Ben Bernanke announced on Wednesday that the Fed will continue its "highly accommodative policies," a reference to quantitative easing, or "asset purchases," as Bernanke describes it.
Although economic growth "has generally been proceeding at a moderate pace," Bernanke noted that the unemployment rate, now 7.3 percent, "remains well above acceptable levels. Long-term unemployment and underemployment remain high," he continued. "And we have seen ongoing declines in labor force participation, which likely reflects discouragement on the part of many potential workers."
Bernanke said the Fed's Federal Open Market Committee has "decided to await more evidence that the recovery’s progress will be sustained" before slowing down its asset purchases.
In response to a question, Bernanke emphasized that the criterion for ending the bond-buying stimulus program is a "substantial improvement in the outlook for the labor market." But he said the unemployment rate alone is not necessarily "a great measure" of the state of the labor market.
"For example, just last month the decline in the unemployment rate came about more than entirely because of decline in participation, not because of increased jobs. So what we will be looking at is the overall labor market situation, including the unemployment rate but including other factors as well. But in particular, there is not any magic (unemployment) number that we are shooting for. We're looking for overall improvement in the labor market."
Bernanke said in his opinion, quantitative easing "has been effective."
"If you look at the recovery, you see that some of the strongest sectors, the leading sectors like housing and autos, have been intrasensitive sectors and that these policies have been successful in strengthening financial conditions, lowering interest rates and thereby promoting recovery. So I do think that they have been effective."
Bernanke admitted to being "somewhat concerned" about the economy. "So to the extent that our...policy decision today makes conditions just a little bit easier, that's desirable. We want to make sure that the economy has adequate support...until we can be comfortable that the economy is in fact growing, you know, the way we want it to be growing.
"So this was a step -- it was a step -- a precautionary step, if you will," Bernanke said. "The intention is to -- is to wait a bit longer and to try to get confirming evidence, whether...or not the economy is in fact conforming to this general outlook that we -- that we have."