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Congressional Record [.PDF]
2003 Ron Paul 83:1
HON. RON PAUL
IN THE HOUSE OF REPRESENTATIVES
Thursday, July 17, 2003
2003 Ron Paul 83:2
Mr. PAUL. Mr. Speaker, I rise to introduce legislation to restore financial stability to Americas economy by abolishing the Federal Reserve. I also ask unanimous consent to insert the attached article The Greatest Theft in History by Professor Murray Sabrin, into the RECORD. Professor Sabrin provides an excellent summary of how the Federal Reserve is responsible for the nations current economic difficulties.
2003 Ron Paul 83:3
Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserves inflationary policies. This represents a real, if hidden, tax imposed on the American people.
2003 Ron Paul 83:4
From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial boom followed by a recession or depression when the Fed-created bubble bursts.
2003 Ron Paul 83:5
With a stable currency, American exporters will no longer be held hostage to an erratic monetary policy. Stabilizing the currency will also give Americans new incentives to save as they will no longer have to fear inflation eroding their savings. Those members concerned about increasing Americas exports or the low rate of savings should be enthusiastic supporters of this legislation.
2003 Ron Paul 83:6
Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of the special interests and their own appetite for big government.
2003 Ron Paul 83:7
Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.
2003 Ron Paul 83:8
In fact, Congress constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender. Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nations founders: one where the value of money is consistent because it is tied to a commodity such as gold. Such a monetary system is the basis of a true free-market economy.
2003 Ron Paul 83:9
In conclusion, Mr. Speaker, I urge my colleagues to stand up for working Americans by putting an end to the manipulation of the money supply which erodes Americans standard of living, enlarges big government, and enriches well-connected elites, by cosponsoring my legislation to abolish the Federal Reserve.
2003 Ron Paul 83:10
THE GREATEST THEFT IN HISTORY
(By Murray Sabrin)
2003 Ron Paul 83:11
We know the interest rate paid on shortterm risk free deposits are based on the real rate plus an inflation premium. Historically, the real rate — the rental price of money — is the annual rate that borrowers and lenders agree on is typically 2–3 percent. So if you borrow $100 for a year, you would expect to pay the lender about $103 at the end of one year.
2003 Ron Paul 83:12
However, if price inflation is expected to be 3% for the year the loan is outstanding, the lender wants to protect his principal from the decline in the dollars purchasing power. So, the interest rate on the loan would thus not be just 2% (assuming this is the real rate), but 2% plus an inflation premium of 3%, for a total of 5%.
2003 Ron Paul 83:13
Currently the annual inflation rate is about 2.5%. Thus, the risk free rate (the real rate-2% — plus the inflation premium) on savings deposits and money market funds should be about 4.5%. For Americans who seek the safety of savings accounts and money market funds for their hard-earned money, the current average yield of 0.7% on money market funds is well below the current risk free rate. In addition, savers who own short-term U.S. Treasury debt are receiving slightly more than 1.1 % annually. Whats going on? How can savers be receiving about 3.5% less than the risk free rate on their money market accounts and savings accounts?
2003 Ron Paul 83:14
The answer is simple: The Federal Reserve, the government created institution that was founded to stabilize the value of the dollar and smooth out the business cycle, which has the legal authority to create money out of thin air, is nothing more than the greatest manipulator of interest rates in the history of the world.
2003 Ron Paul 83:15
The FED pumps money into the banking system if it wants to lower interest rates in order to stimulate the economy, and conversely will take money out of the banking system if it want to dampen borrowing and cool off an overheated economy.
2003 Ron Paul 83:16
For the past two-and-a-half years the FED has been pumping money into the banking system, driving down short-term interest rates to its current levels, well below the risk free rate. In fact, the American people are being penalized heavily for saving. Real interest rates are negative.
2003 Ron Paul 83:17
In short, the American people are being ripped off to the tune of tens of billions of dollars per year.
2003 Ron Paul 83:18
To put this in dollars and cents, there are $2.2 trillion in money market funds, with an average annual yield of 0.7%. The income from these funds is about $15 billion a year. If interest rates were 4.5%, savers would have nearly one hundred billion dollars in income or $85 billion more than they are currently receiving.
2003 Ron Paul 83:19
Moreover, there is $4.61 trillion in the nations time and savings deposits, earning an average of about 1.0% or more depending on the financial institution your money is deposited in. (ING Direct pays 2.10% online on short-term deposits. The money can be transferred from your checking account to an online account and back. The minimum deposit to open an account is only $1. This is not a misprint.)
2003 Ron Paul 83:20
Using the same 4.5% risk free rate, savers should be receiving about $210 billion on their short-term deposits at the nations financial institutions. Instead, they are earning about $50 billion, for a loss of $160 billion in annual income. In addition, the U.S. Treasury has approximately $1 trillion in short-term debt that is yielding a little more than 1%. Savers holding the federal governments short-term debt are losing approximately $35 billion in annual income.
2003 Ron Paul 83:21
The bottom line: While the economic debate in Washington DC centers around President Bushs tax cut proposal, which should pass intact because less money in the federal government means more freedom and prosperity for the American people, the Federal Reserve continues to perpetuate the greatest theft in world history. By having the power to manipulate interest rates, the FED in effect has not only a license to print money but also can redistribute income form savers to borrowers.
2003 Ron Paul 83:22
The winners of the FEDs interest rate manipulations include the nations financial institutions, business borrowers and government. The losers are anyone who wants to save for the proverbial rainy day and accumulate money for a down payment on a house or other family need.
2003 Ron Paul 83:23
Thus, Federal Reserve policy aids and abets the legalized theft of hundreds of billions of dollars per year from low-and middle- income families to the economic elites of this country and profligate governments at all levels — all with the approval of the U.S. Congress and the Bush administration.
2003 Ron Paul 83:24
After 90 years of manipulating interest rates, it is time to abolish the FED and return the country to the only sound monetary system that is consistent with liberty and prosperity — the gold standard.