U.S. Rep. Ron Paul | derivatives |
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Revamping The Monetary System
24 September 1998 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.
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World Financial Markets
1 October 1998 1998 Ron Paul 104:11
Credit conditions that allow a company with less than $1 billion in capital to buy $100 billion worth of stock with borrowed money and manage $1.2 trillion worth of derivatives is about as classic an example as one could ever find of speculative excess brought on by easy credit. As long as capital is thought to come from a computer at the Federal Reserve and not from savings, the financial problems the world faces today will persist.
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Hedge Fund Bailout
2 October 1998 1998 Ron Paul 105:1
Mr. PAUL. Mr. Speaker, the Federal Reserve orchestrated bailout of the hedge fund Long-Term Capital Management LP raises serious policy questions. At one point, the notional value of the Cayman Island-registered fund’s derivatives totalled about $1.2 trillion. We should look seriously at this issue because of the taxpayer-backed liability concerns raised by the involvement of an agency with the full faith and credit of the U.S. government. The state of Michigan has taken a constructive first step regarding the public policy concerns of derivatives. I urge us to consider the wisdom of the State Representative Greg Kaza as we debate this issue.
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Hedge Fund Bailout
2 October 1998 1998 Ron Paul 105:2
STATEMENT OF HON. GREG KAZA, MICHIGAN STATE REPRESENTATIVE, ADJUNCT PROFESSOR OF FINANCE, WALSH COLLEGE Derivatives are financial instruments broadly defined as any contract or convertible security that changes in value in concert with a related or underlying security, fixed-income instrument, future or other instrument, currency or index; or that obtains much of its value from price movements in a related or underlying instrument; or an option, swap, warrant, or debt instrument with one or more options embedded in or attached to it, the value of which contract or security is determined in whole or in part by the price of one or more underlying instruments or markets.
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Hedge Fund Bailout
2 October 1998 1998 Ron Paul 105:3
Although derivatives are a relatively recent development in financial markets, their use by corporations, pension and mutual funds, financial institutions, governments and those involved in money management are clearly ascendant, according to the Federal Reserve and other federal agencies. The issue is not whether the government should ban or in some way restrict the prudent use of derivatives to hedge risk. Rather, the issue is one of disclosure, i.e., how best to provide increased transparency as our complex international financial system enters the 21st Century.
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Hedge Fund Bailout
2 October 1998 1998 Ron Paul 105:4
Three years ago I addressed the very same issue in Michigan by authoring state legislation that provided increased transparency by requiring units of government to disclose their derivative holdings to the public. Government units have to make investment decisions regarding the money they receive or retain; unfortunately, investment practices and decisions can sometimes lead to significant losses when taxdollars are unwisely invested in derivatives. Orange County in California and Independence Township in Oakland County, Michigan are both examples of government units that experienced significant losses as a result of the imprudent use of derivatives.
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Hedge Fund Bailout
2 October 1998 1998 Ron Paul 105:5
Initially, some of my colleagues wondered whether a ban or restriction on the use of derivatives would be preferable. But committee testimony soon convinced them that derivatives, although complex, are used by many institutions, including government pension funds, to prudently hedge risk. Our five-bill package required public disclosure of derivative holdings by government units. The legislation garnered bi-partisan sponsorship and support, and ultimately became state law.
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Hedge Fund Bailout
2 October 1998 1998 Ron Paul 105:6
A related issue that we discussed privately at the time was whether the potential for moral hazard created by federal deposit insurance means private financial institutions should be required to disclose their derivative holdings in the interest of transparency. You are now likely to contemplate this issue yourselves given events surrounding the hedge fund in question, Long-Term Capital Management; and the potential for systemic risk posed by any future episode that might involve the imprudent use of derivatives and excessive amounts of leverage.
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Congress Relinquishing The Power To Wage War
2 February 1999 1999 Ron Paul 4:73
When the foreign registered corporation long term capital management was threatened in 1998, that is, the market demanding a logical correction to its own exuberance with its massive $1 trillion speculative investment in the derivatives market, Greenspan and company quickly came to its rescue with an even greater acceleration of credit expansion.
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A Republic, If You Can Keep It
31 January 2000 2000 Ron Paul 2:110
There are many reasons to believe the economic slowdown will be worldwide, since the dollar is the reserve currency of the world. An illusion about our dollar’s value has allowed us to prop up Europe and Japan in this pass decade during a period of weak growth for them, but when reality sets in, economic conditions will deteriorate. Greater computer speed, which has helped to stimulate the boom of the 1990s, will work in the opposite direction as all of the speculative positions unwind, and that includes the tens of trillions of dollars in derivatives.
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CONGRESS IGNORES ITS CONSTITUTIONAL RESPONSIBILITY REGARDING MONETARY POLICY
October 11, 2000 2000 Ron Paul 84:4
It should surprise no one that our financial markets are getting more volatile every day. Inflating a currency and causing artificially low interest rates always leads to malinvestment, overcapacity, excessive debt, speculation, and dangerous trade imbalances. We now live in a world awash in a sea of fiat currencies, with the dollar, the yen, and the Euro leading the way. The inevitable unwinding of the wild speculation, as reflected in the derivatives market, is now beginning.
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ECONOMIC PROBLEMS AHEAD
November 13, 2000 2000 Ron Paul 93:9
* Rising interest rates in the high yield bond market is giving us an indication that a serious problem is just around the bend. Commercial debt was but $50 billion in 1994 and is now ten times higher now at $551 billion. The money supply is now growing at greater than a 10% rate and the derivatives market, although difficult to calculate, probably exceeds $75 trillion. We also have consumer debt, which is at record highs and has not yet shown signs of slowing. The Dow Jones Industrial Average stocks are now 5 times book value, the highest in over a hundred years. There will come a day when most people come to realize the fraud associated with Social Security and the inability for it to continue as currently managed. Rising oil and natural gas prices, it is argued, are not inflationary, yet they are playing havoc with the pocketbooks of most Americans. The economies of Asia, and in particular Japan, will not offer any assistance in dealing with the approaching storm in this country. Our foreign policy, which continues to obligate our support around the world, shows no signs of changing and will contribute to the crisis and possibly our bankruptcy.
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The US Dollar and the World Economy
September 6, 2001 2001 Ron Paul 75:32
A major problem still remains. Ultimately the market determines all value including all currencies. With the current direction of the dollar certainly downward, the day of reckoning is fast approaching. A weak dollar will prompt dumping of GSE securities before treasuries, despite the Treasury’s and the Fed’s attempt to equate them with government securities. This will threaten the whole GSE system of finance, because the challenge to the dollar and the GSEs will hit just when the housing market turns down and defaults rise. Also a major accident can occur in the derivatives markets where Fannie Mae and Freddie Mac are deeply involved in hedging their interest-rate bets. Rising interest rates that are inherent with a weak currency will worsen the crisis.
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Introduction of the Monetary Freedom and Accountability Act
February 13, 2002 2002 Ron Paul 8:4
While the Treasury denies it is dealing in gold, the Gold Anti-Trust Action Committee (GATA) has uncovered evidence suggesting that the Federal Reserve and the Treasury, operating through the Exchange-Stabilization Fund and in cooperation with major banks and the International Monetary Fund, have been interfering in the gold market with the goal of lowering the price of gold. The purpose of this policy has been to disguise the true effects of the monetary bubble responsible for the artificial prosperity of the 1990s, and to protect the politically-powerful banks that are heavy invested in gold derivatives. GATA believes federal actions to drive down the price of gold help protect the profits of these banks at the expense of investors, consumers, and taxpayers around the world.
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Introduction of the Monetary Freedom and Accountability Act
February 13, 2002 2002 Ron Paul 8:5
GATA has also produced evidence that American officials are involved in gold transactions. Alan Greenspan himself referred to the federal government’s power to manipulate the price of gold at hearings before the House Banking Committee and the Senate Agricultural Committee in July, 1998: “Nor can private counterparts restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise .” [Emphasis added].
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Introduction of the Monetary Freedom and Accountability Act
February 13, 2002 2002 Ron Paul 8:13
It is no secret that Morgan Chase was one of Enron’s biggest lenders, reportedly losing at least $600 million and, perhaps, billions. The banking giant’s stock has gone south, and management has been called before its shareholders to explain substantial investments in highly speculative derivatives C hidden speculation of the sort that overheated and blew up on Enron.
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Introduction of the Monetary Freedom and Accountability Act
February 13, 2002 2002 Ron Paul 8:14
In recent years Morgan Chase has invested much of its capital in derivatives, including gold and interest-rate derivatives, about which very little information is provided to shareholders. Among the information that has been made available, however, is that as of June 2000, J.P. Morgan reported nearly $30 billion of gold derivatives and Chase Manhattan Corp., although merged with J.P. Morgan, still reported separately in 2000 that it had $35 billion in gold derivatives. Analysts agree that the derivatives have exploded at this bank and that both positions are enormous relative to the capital of the bank and the size of the gold market.
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Introduction of the Monetary Freedom and Accountability Act
February 13, 2002 2002 Ron Paul 8:15
It gets worse. J.P. Morgan’s total derivatives position reportedly now stands at nearly $29 trillion, or three times the U.S. annual gross domestic product. Wall Street insiders speculate that if the gold market were to rise, Morgan Chase could be in serious financial difficulty because of its “short positions” in gold. In other words, if the price of
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Introduction of the Monetary Freedom and Accountability Act
February 13, 2002 2002 Ron Paul 8:19
According to Murphy, “The price of gold always has been a barometer used by many to determine the financial health of the United States. A steady gold price usually is associated by the public and economic analysts as an indication or a reflection of the stability of the financial system. Steady gold; steady dollar. Enron structured a financial system that put the company at risk and eventually took it down. The same structure now exists at Morgan Chase with their own interest-rate/gold-derivatives position. There is very little information available about its position in the gold market and, as with the case of Enron, it could easily bring them down.”
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Introduction of the Monetary Freedom and Accountability Act
February 13, 2002 2002 Ron Paul 8:22
While all the defendants flatly deny participation in such a scheme, Howe’s case is being heard. Howe tells Insight he has provided the court with very compelling evidence to support his claim, including sworn testimony by Greenspan before the House Banking Committee in July 1998. Greenspan assured the committee, “Nor can private counterparties restrict supply of gold, another commodity whose derivatives are often traded over the counter, where central banks stand ready to lease gold in increasing quantities should the price rise.” Howe and other “gold bugs” cite this as a virtual public announcement “that the price of gold had been and would continue to be controlled if necessary.”
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Introduction of the Monetary Freedom and Accountability Act
February 13, 2002 2002 Ron Paul 8:23
According to Howe, “There is a great deal of evidence, but this is a very complicated issue. The key, though, is the short position of the banks and their gold derivatives. The central banks have ‘leased’ gold for low returns to the bullion banks for the purpose of keeping the price of gold low. Greenspan’s remarks in 1998 explain how the price of gold has been suppressed at times when it looked like the price of gold was increasing.”
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The Monetary Freedom And Accountability Act
17 July 2003 2003 Ron Paul 79:4
While the Treasury denies it is dealing in gold, the Gold Anti-Trust Action Committee (GATA) has uncovered evidence suggesting that the Federal Reserve and the Treasury, as detailed in the attached article. GATA alleges that the Treasury, operating through the Exchange- Stabilization Fund and in cooperation with major banks and the International Monetary Fund, has been interfering in the gold market with the goal of lowering the price of gold. The purpose of this policy has been to disguise the true effects of the monetary bubble responsible for the artificial prosperity of the 1990s, and to protect the politically-powerful banks that are heavy invested in gold derivatives. GATA believes federal actions to drive down the price of gold help protect the profits of these banks at the expense of investors, consumers, and taxpayers around the world.
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The Monetary Freedom And Accountability Act
17 July 2003 2003 Ron Paul 79:5
GATA has also produced evidence that American officials are involved in gold transactions. Alan Greenspan himself referred to the federal government’s power to manipulate the price of gold at hearings before the House Banking Committee and the Senate Agricultural Committee in July, 1998: “Nor can private counterparts restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise.”.
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The Monetary Freedom And Accountability Act
17 July 2003 2003 Ron Paul 79:16
What is important to understand, says Murphy, “is that there is a mine and scrap supply deficit of 1,500 tonnes, which is an enormous deficit when yearly mine supply is only 2,500 tonnes and going down. On top of that, there are these under-reported gold loans and other derivatives that are on the short side. There is no way to pay this gold back to the central banks without the price of gold going up hundreds of dollars per ounce. So the peasants and women of the world will have to sell their jewelry at say $800 an ounce to bail out these short positions or someone is going to have to tell the world that they don’t have the gold that they have reported,” shaking the world’s financial system to its core.
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The Monetary Freedom And Accountability Act
17 July 2003 2003 Ron Paul 79:17
The gold bugs appear to be basing their identification of a world gold shortage on industry data, much of which has been summarized in two papers prepared by four different gold analysts at different times using separate methods. The first paper was written by governmental investment adviser Frank Veneroso and his associate, mining analyst Declan Costelloe. Titled Gold Derivatives, Gold Lending: Official Management of the Gold Price and the Current State of the Gold Market, it was presented at the 2002 International Gold Symposium in Lima, Peru, and estimates the gold deficit of the central banks at between 10,000 and 15,000 tonnes. The second paper, Gold Derivatives: Moving Towards Checkmate, by Mike Bolser, a retired businessman, and Reginald H. Howe, a private investor and proprietor of the Website www.goldensextant.com, estimates the alleged shortage of central-bank gold at between 15,000 and 16,000 tonnes — nearly a decade’s worth of mine production.
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The Monetary Freedom And Accountability Act
17 July 2003 2003 Ron Paul 79:19
Stanley’s estimate is based on data provided by so-called “serious” researchers, including Londonbased Gold Fields Mineral Services (GFMS), one of the world’s foremost precious-metals consultants, and a report titled Gold Derivatives: The Market View, commissioned by the WGC to London-based Virtual Metals Consultancy. While these two groups appear to be the research choice of the official gold world, there are in fact no “official” figures, and both studies, like the Veneroso/Costelloe and Bolser/Howe reports, are based on interviews, data analysis and other research generally available to the industry.
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Amendment No. 6 Offered By Mr. Paul — Part 2
26 October 2005 2005 Ron Paul 110:4
It is the government direction first from the inflation, the artificial interest rates, and then from the allocation of funds that cause distortion. That is what we are dealing with here, the distortion that people are literally frightened about because nobody can even measure the amount of derivatives that are involved with Fannie Mae and Freddie Mac. People are holding their breath for an accident to happen.
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The End Of Dollar Hegemony
15 February 2006 2006 Ron Paul 3:92
Excessive consumption using borrowed money is hardly the way to secure a sound economy. Instead of reining in government spending, Congress remains oblivious to the financial dangers and panders to special interests by offering no resistance whatsoever to every request for new spending. Congress spends $2.7 trillion annually in an attempt to satisfy everyone’s demands. The system has generated over $200 trillion in derivatives.
Texas Straight Talk from 20 December 1996 to 23 June 2008 (573 editions) are included in this Concordance. Texas Straight Talk after 23 June 2008 is in blog form on Rep. Paul’s Congressional website and is not included in this Concordance.
Remember, not everything in the concordance is Ron Paul’s words. Some things he quoted, and he added some newspaper and magazine articles to the Congressional Record. Check the original speech to see.