The SPEAKER pro tempore (Mr.
BASS). The Chair recognized the gentleman from Texas [Mr. PAUL] for 5 minutes.
1998 Ron Paul 102:1
Mr. PAUL.
Thank you, Mr. Speaker. Mr. Speaker,
I’d like to call the attention to
fellow colleagues to the issue of three
things that have happened in the last
couple of days.
1998 Ron Paul 102:2
Today it was recorded in our newspapers
and it was a consequence of a
meeting held last night and that has to do
with a company that went bankrupt,
Long-Term Capital Management, and I believe
this has a lot of significance and
something that we in the Congress
should not ignore.
1998 Ron Paul 102:3
This is a hedge fund. Their capitalization
is less than $100 billion, but,
through the derivatives markets, they
were able to buy and speculate in over
$1 trillion worth of securities, part of
the financial bubble that I have expressed
concern about over the past
several months.
1998 Ron Paul 102:4
But last night an emergency meeting
was called by the Federal Reserve
Bank of New York. It wasn’t called by
the banks and the security firms that
were standing to lose the money, but
the Federal Reserve Bank of New York
called an emergency meeting late last
night. Some of the members of this
meeting, the attendees of this meeting, came back
from Europe just to attend this meeting
because it was of such serious nature. They put together a package of
$3.5 billion to bail out this company.
1998 Ron Paul 102:5
Yesterday, also, Greenspan announced
that he would lower interest rates. I do
not think this was an accident or not
coincidental. It was coincidental that
at this very same time they were meeting
this crisis, Greenspan had to announce
that, yes indeed, he would inflate
our currency, he would expand
the money supply, he would increase
the credit, he would lower interest
rates. At least that’s what the markets
interpreted his statement to mean. And the stock market responded
favorably by going up 257 points.
1998 Ron Paul 102:6
On September 18th, the New York
Times, and this is the third issue that
that has come about in the last several
weeks, on 9/18 the New York Times editorialized
about why we needed a worldwide
Federal Reserve system to bail out the
countries involved in this financial crisis.
1998 Ron Paul 102:7
Yesterday, on the very same day,
there was another op-ed piece in the
New York Times by Jeffrey Garten,
calling again for a worldwide central
bank, that is, a worldwide Federal Reserve
system to bail out the ailing
economies of the world.
1998 Ron Paul 102:8
The argument might go, yes, indeed,
the financial conditions of the world is
rather severe and we should do something. But the financial conditions of
the world is in trouble because we have
allowed our Federal Reserve System, in
deep secrecy, create credit out of
thin air and contribute to the bubble
that exists. Where else could the credit
come from for a company like
Long-Term Capital Management? Where
could they get this credit, other than
having it created and encouraged by a
monetary system engineered by our
own Federal Reserve System?
1998 Ron Paul 102:9
We will have to do something about
what is happening in the world today,
but the danger that I see is that the
movement is toward this worldwide
Federal Reserve System or worldwide
central bank; more of the same
problem. If we have a fiat monetary
system, not only in the United States
but throughout the world, that has
created the financial bubble, what
makes anybody think that creating
more credit out of thin air will solve
these problems? It will make the problems
much worse.
1998 Ron Paul 102:10
We need to have a revamping of the
monetary system, but certainly it cannot
be saved, it cannot be improved, by
more paper money out of thin air, and
that’s what the Federal Reserve System
is doing.
1998 Ron Paul 102:11
I’d like to remind my colleagues
that when the Federal Reserve talks
about lowering interest rates, like Mr. Greenspan announced yesterday, or alluded
to, this means that the Federal
Reserve will create new credit. Where
do they get new credit and new money? They get it out of thin air. And this, of
course, will lower interest rates on the
short run and this will give a boost to
a few people in trouble and it will bail
out certain individuals.
1998 Ron Paul 102:12
When we create credit to bail out
other currencies or other economies,
yes, this tends to help. But the burden
eventually falls on the American taxpayer,
and it will fall on the value of
the dollar. Already we have seen some
signs that the dollar is not quite as
strong as it should be if we are the
haven of last resort as foreign capital
comes into the United States. The dollar
in relationship to the Swiss franc
has been down 10 percent in the last
two months. In a basket of currencies, of
15 currencies of J.P. Morgan, it’s
down 5 percent in one month.
1998 Ron Paul 102:13
So when we go this next step of saying,
yes, we must bail out the system
by creating new dollars, it means that
we are attacking the value of the
money and when we do this, we steal the
value of the money from the people
who already hold dollars.
1998 Ron Paul 102:14
If we have an international Federal
Reserve System that is permitted to do
this without legislation and out of the
realms of the legislative bodies around
the world, it means that they can steal
the value of the strong currencies. So
literally an international central bank
could undermine the value of the dollar
without permission by the U.S. Congress,
without an appropriation, but
the penalty will fall on the American
people by having a devalued dollar.
1998 Ron Paul 102:15
This is a very dangerous way to go,
but the movement is on. As I mentioned,
it has already been written up
in the New York Times. George Soros
not too long ago, last week, came before
the Banking Committee making the same argument.
1998 Ron Paul 102:16
What does he happen to be? A
hedge fund operator, the same business
as Long-Term Capital Management,
coming to us and saying,
“Oh, what you better do is protect the system.”
Well, I don’t think the American
people can afford it. We do have a financial
bubble, but financial bubbles
are caused by the creation of new credit
from central banks. Under a sound
monetary system you have commodity
standard of money where politicians
lose total control. Politicians do
not have control and they do not instill
trust into the paper money system.
1998 Ron Paul 102:17
And we go one step further. The Congress
has reneged on its responsibility
and has not maintained the responsibility
of maintaining value in the
dollar. It has turned it over to a very
secretive body, the Federal Reserve
System, that has no responsibility to
the U.S. Congress. So I argue for the
case of watching out for the dollar and
arguing for sound money, and not to
allow this to progress any further. Thank you.
Note:
1998 Ron Paul 102:2 Long-Term Capital Management possibly the same company referred to as
Long Term Credit Management in 1998 Ron Paul 104:1.
and as Long Term Capital Management LP in
1998 Ron Paul 120:16.
