2001 Ron Paul 23:1
Mr. PAUL. Mr. Speaker, the markets
today are reeling. The financial markets
are indeed in big trouble. This
could mean a couple of things to all of
us. First, it could mean economic hardship
for many of our citizens. It also
could mean that our budget figures will
be completely changed here in the nottoo-
distant future, and we should be
paying attention.
2001 Ron Paul 23:2
Some people claim that they are not
quite sure why markets go up and all
of a sudden crash; and others say if
only Alan Greenspan would just print
more money, inflate the currency faster,
lower the interest rates, all would
be well. But I do not think it is that
simple.
2001 Ron Paul 23:3
It is very clear that we have these
cycles and these booms coming from a
monetary system that is pure fiat. Fiat
money means that the money is created
out of thin air, and the characteristic
of a fiat monetary system is
that you have overspeculation, you
have stock market booms, you have
stock market crashes, and you have a
business cycle. This comes from the
mismanagement of money, mainly because
man, in his efforts to plan, to
have economic central planning
through monetary policy, is incapable
of providing the information necessary
that a free market is supposed to have.
2001 Ron Paul 23:4
Only a free market can tell us what
interest rates should be or what the
money supply should be. But we have
become dependent on a Federal Reserve
system that pretends to know all
these things, and we have allowed Alan
Greenspan to believe that he can regulate
the entire economy as well as the
stock market by the Open Market
Committee.
2001 Ron Paul 23:5
Inflation is nothing more than the
creation of new money out of thin air.
Sometimes it raises prices in certain
areas, and other times in other places.
But the whole principle of fiat money
is when you create new money, you devalue/
lower the value of the dollar.
2001 Ron Paul 23:6
This is what is happening. Right now
we are increasing the money supply as
measured by MZM at the rate of 20 percent
per year. This means that, ultimately,
that dollar that we use to purchase
goods and services will go down
in value. And yet the only thing that
we hear about is the cry to the Federal
Reserve, just print more money, faster,
because that will save us all. It will
raise the stock market; it will make
sure that the economy does not go
down and go into a downturn.
2001 Ron Paul 23:7
This is not the case. Ultimately what
we have to have is monetary reform,
currency reform. We have to have a
time when once again we have money
that cannot be created out of thin air.
We have to have money of value, something
that governments and politicians
cannot create out of thin air. Unless we
address that, we are going to continue
with these problems.
2001 Ron Paul 23:8
This can be very serious. Just in the
last year there has been $4 trillion of
value lost in the stock market. Of
course, it was artificially high, and
now it is going to be artificially low,
and these sudden changes reflect the
disequilibrium built into the system
once we have a monetary system of
this sort.
2001 Ron Paul 23:9
In 1996, the chairman of the Federal
Reserve Board talked about the exuberance,
the irrational exuberance in
the stock market; and yet I think he
knew, I certainly knew, and others
knew, that there was irrational exuberance,
because even at that time we
were printing money like crazy. There
was overspeculation.
2001 Ron Paul 23:10
If he had been seriously concerned
about the exuberance getting out of
control in 1996, he might have considered
not inflating the currency quite so
rapidly, not devaluing the money quite
so rapidly. But what has he done since
that time? The Federal Reserve has literally
created $2.3 trillion of new
money since 1996, further creating a
bigger bubble, which eventually had to
collapse, and that is what we are in the
midst of. It can be tough. It is going to
be tough for a lot of people. We can
have this economic downturn, and this
means jobs and a standard of living
that will be threatened.
2001 Ron Paul 23:11
This type of a monetary system also
encourages us to do things unwisely.
When interest rates are lower than
they are supposed to be, we borrow
more money and we do not save as
much money, so savings has a negative
rate. Yet people are way in debt, business
people are in debt, and then business
people are actually encouraged to
do things that are not wise. They overbuild;
they build into the system overcapacity
and mal-investment which
eventually has to be cleansed out of
the system.
2001 Ron Paul 23:12
So this mantra of saying all we need
is more inflation will not work. Inflation
caused the problem. The inflation
of the monetary system is the problem.
To believe that all we need is more inflation
to solve the problem is a serious
error. We need currency reform.
