19 April 2011

Ron Paul
1998 Ron Paul Chapter 97

Worldwide Financial Crisis

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10 September 1998

The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Texas (Mr. PAUL) is recognized for 5 minutes.

1998 Ron Paul 97:1
Mr. PAUL. Mr. Speaker, the largest of all bubbles is now bursting. This is a worldwide phenomenon starting originally in Japan 9 years ago, spreading to East Asia last year, and now significantly affecting U.S. markets.

1998 Ron Paul 97:2
All financial bubbles are currency driven. When central banks generously create credit out of thin air speculation, debt, and malinvestment result. Early on the stimulative effect is welcomed and applauded as the boom part of the cycle progresses. But illusions of wealth brought about by artificial wealth creation end when the predictable correction arrives. Then we see the panic and disappointment as wealth is wiped off the books.

1998 Ron Paul 97:3
These events only occur when governments and central banks are given arbitrary authority to create money and credit out of thin air. Paper money systems are notoriously unstable; and the longer they last, the more vulnerable they are to sudden and sharp downturns.

1998 Ron Paul 97:4
All countries of the world have participated in this massive inflationary bubble with the dollar leading the way. Being a political and economic powerhouse, U.S. policy and the dollar has had a major influence throughout the world and, in many ways, has been the engine of inflation driving world financial markets for years.

1998 Ron Paul 97:5
But economic law dictates that adjustments will be made for all the bad investment decisions based on erroneous information about interest rates, the money supply, and savings.

1998 Ron Paul 97:6
The current system eventually promotes overcapacity and debt that cannot be sustained. The result is a slump, a recession, or even a depression. When the government makes an effort to prevent a swift, sharp correction, the agony of liquidation is prolonged and deepened. This is what is happening in Japan and other Asian countries today. We made the same mistake in the 1930s.

1998 Ron Paul 97:7
A crisis brought on by monetary inflation cannot be aborted by more monetary inflation or the IMF bailouts favored by the American taxpayer. It may at times delay the inevitable, but eventually, the market will demand liquidation of the malinvestment, excessive debt, and correction of speculative high prices as we have seen in the financial markets.

1998 Ron Paul 97:8
All this could have been prevented by a sound monetary system, one without a central bank that has monopoly power over money and credit and pursues central economic planning. My concern is profound. The retirement and savings of millions of Americans are jeopardized. Economic growth could be reversed sharply and quickly as it already has in the Asian countries. Budget numbers will need to be sharply revised.

1998 Ron Paul 97:9
The Federal Reserve hints at lower interest rates which means more easy credit. This may be construed as a positive for the market, but it only perpetuates a flawed monetary system.

1998 Ron Paul 97:10
Protecting the dollar is our job here in the Congress, and we are not paying much attention. Although turmoil elsewhere in the world has given a recent boost to the dollar, signs are appearing that the dollar, unbacked by anything of real value, is vulnerable. Setting a standard for the dollar with real value behind it can restore trust to the system and will become crucial in solving our problems, soon to become more apparent.

1998 Ron Paul 97:11
The sooner we understand the nature of the problem and start serious discussions on how to restore soundness to our money the sooner we can secure the savings, investments, and retirements of all Americans.

1998 Ron Paul 97:2 All financial bubbles are currency driven. probably should be hyphenated: All financial bubbles are currency-driven.

1998 Ron Paul 97:7 IMF bailouts favored by the American taxpayer uses favored in the sense of a favor funded by the American taxpayer. It does not suggest the American taxpayer prefers to provide the bailouts.

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