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2010 Ron Paul Chapter 19

CURRENCY CRISIS

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6 May 2010


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

2010 Ron Paul 19:1
Mr. PAUL. I rise today to talk a bit about our economy and the marketplace which, if anybody has observed, is in shambles. A couple of years ago, we had a financial crisis; basically, a bit of problems in debt with the financial institutions, the banks, and a lot of corporations. That was a rather hectic period of time. But I think what weíre moving into now is much, much more serious, and what I see happening is that this is not a financial problem as much as a currency problem. Everybody knows there are major problems in Greece right now because of the debt load that they have and they cannot finance, and nobody is there at the moment to bail them out.

2010 Ron Paul 19:2
A lot has been happening. I have been interested in this subject for a long time. As a matter of fact, in 1971, with the breakdown of the Bretton Woods agreement, I became fascinated with economics and politics. At that time, there was a devaluation of the dollar of 3.8 percent, and it was very, very big news. And thatís when the dollar was connected to gold and there was a devaluation against gold. This was a major event and ushered in a major amount of inflation in the 1970s. Yet, this process continues. As a matter of fact, the breakdown in 1971 opened up the doors to massive inflation. And thatís what we have been doing for 35, 40 years of inflating the currency, creating many and multiple financial bubbles which have burst and have given us a great deal of trouble. But a currency crisis is much worse because people lose confidence in the dollar.

2010 Ron Paul 19:3
Now, I have talked a lot about the value of the dollar. And somebody might wonder exactly why I would come today and talk about the concern I have for the value of the dollar, because if you look at the dollar, the dollar is a haven. The dollar has been going up sharply in terms of other international currencies. They would say that this is a haven. Itís still strong. People are buying our Treasury bills. But I still argue the case that there is a currency crisis going on. Because if you look at the one true money, the one money that has existed for 6,000 years that outlasts all the paper money and all the fiat currency, that is gold. It doesnít look very good and is sending a signal that a lot of inflation lurks in the future.

2010 Ron Paul 19:4
In the past several years, maybe even 10 or 15 years, the dollar and the gold relationship depended on gold acting as a commodity. It moved with the stock market. It moved with commodity prices. But no longer. Instead of the gold going down when the stocks went down, instead of the gold going down when the commodities go down, instead of the gold going down when the dollar goes up, all of a sudden people are resorting to putting dollars and other currencies in gold. This is sending a signal that the confidence is being lost in the entire fiat monetary system. And the dollar, of course, is the reserve currency of the world and, therefore, a very significant event.

2010 Ron Paul 19:5
But there are even other statistics to suggest that weíre in for a lot more inflation. If we look at what has happened to producer prices in the past 12 months, we find out that producer prices have already moved up significantly. For instance, finished consumer goods are up 8.2 percent in the last 12 months. Finished consumers goods, excluding food, are up 8.3. Finished energy goods are up 20 percent. Now, that has not yet affected the Consumer Price Index, but, in the months to come, the producer prices will move into the consumer products, so we can expect a lot more inflation.

2010 Ron Paul 19:6
Now, the way we get in this trouble is due to accepting some notions about money that are false. We have believed since 1971 that there should be no linkage of our money to anything sound as the Constitution mandates. There should be no linkage of the dollar to gold or silver, which then gives the Congress leeway of spending endlessly; deficits donít matter. We can tax and we can borrow; but if we still donít have enough money, we can depend on the Federal Reserve just to print the money.

2010 Ron Paul 19:7
Now, that has lasted for a long time, and weíve been getting away with it; but the market is more powerful than the central bank and the politicians. The market usually rules and they come and say the money isnít worth what it used to be. Thereís too much mal-investment, thereís too much debt, and therefore a correction must occur. This happened with the financial situation: there had to be a correction, the bubble burst, and there are some adjustments.

2010 Ron Paul 19:8
But everything that we have done over these past several years and even over the last several decades has always been to resort to more inflation, print more money, spend more money, which only produces a problem that delays the inevitable. What I am afraid of is the inevitable is here, and we must do something about it.

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