The banks are on their way to failure anyway. Inflation is kept down at a retail level largely due to dirt cheap consumer products made in impoverished, slave-states. And energy prices have been kept low by the cartels.
Debt is at incredibly high levels per GDP (as I understand), and foreign debts payment failures have been covered by large cash infusions from the IMF, world bank etc (US taxpayers mostly), but that is close to being maxed out.
Unsecured debt is failing apace with increasing bankruptcies (both personal and corporate).
At some point, bankruptcies may go nuclear. What happens then?
At that point they say debt "unwinds" meaning that with each bankruptcy more and more lenders are unable to pay THEIR debts causing a cascade of bankruptcies, and ultimately failure of the financial system. That failure is what the Fed is supposed to prevent, therefore, eliminating the Fed as Ron Paul proposes will guarantee the collapse of the entire US economy and the rest of the world attached to it. It is not a pretty picture (and not a good proposal from Ron Paul).