U.S. Rep. Ron Paul | interest rate |
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State Of The Republic
28 January 1998 1998 Ron Paul 2:51
All these rosy projections are dependent on economic strength, steady low interest rates, and no supplemental appropriations. Every session of Congress gets supplementals, and if the economy takes a downturn, the higher the appropriation.
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State Of The Republic
28 January 1998 1998 Ron Paul 2:62
The international currency crisis: Congress lacks concern and understanding of the significance of the Asian currency crisis. Monetary policy has never excited many Members of the Committee on Banking, let alone other members of Congress. A handful of Members do consistently complain to the Chairman of the Federal Reserve, but inevitably it is to object to the high interest rates and not enough credit being available to either the poor or the rich beneficiaries of Central Bank credit largesse.
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State Of The Republic
28 January 1998 1998 Ron Paul 2:67
Long-term, the average American citizen suffers through higher interest rates, rising prices, recessions and lower standard of living, but the cause and effect is conveniently hidden from the public and the Congress.
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State Of The Republic
28 January 1998 1998 Ron Paul 2:72
Instead, the dollar was crowned king, and Greenspan promised stability. Our real interest rates, balance of payments, our current account deficit and budgetary deficits were conveniently ignored, because if they had been looked at seriously, it would have been recognized that the U.S. and the world faces a major financial crisis once the dollar can no longer be used to bail out the world financial system.
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State Of The Republic
28 January 1998 1998 Ron Paul 2:74
But when push comes to shove, the markets always win out. Interest rates are less than one percent in Japan, but have not prompted borrowers to come forth nor bankers to lend. The proposed $25 billion injection by the Bank of Japan will not solve the problem either. Even central bankers cannot push on a string.
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State Of The Republic
28 January 1998 1998 Ron Paul 2:100
Both types of welfare expenditures benefit from a monetary system that creates credit out of thin air in order to monetize congressional deficits when needed and manipulate interest rates downward to nonmarket levels to serve the interests of big borrowers and lenders. Federal Reserve policy is an essential element in serving the powerful special interests. Monetary mischief of this type will not likely be ended by congressional action, but will be eventually stopped by market forces, just as has recently occurred in the Far East.
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Credit Union Membership Access Act
1 April 1998 1998 Ron Paul 33:3
The NCUSIF was the only deposit insurance fund started without any federal seed money and the credit unions never came to Washington for a taxpayer-funded bailout. In fact, allowing multiple common bonds for credit unions enhanced their safety and soundness. This bill will add new “safety and soundness” and CRA-like regulations on credit unions. These regulations will add a burdensome regulatory cost. This cost will be passed on to the consumer in the form of higher fees, higher interest rates and less service. It is the marginal consumer who will lose the most when this bill becomes law.
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The Bubble
28 April 1998 1998 Ron Paul 39:4
Alan Greenspan took over the Fed a few months before the stock market crash of October, 1997. In the 10 years that Greenspan has headed the Fed, $2 trillion of new credit has been created as measured by M3. Banks threatened by bankruptcy in the early 1990s received generous assistance from the Fed policy of low interest rates and rapid credit expansion as a response to the recession of 1991. Fed fund rates were held at 3 percent for well over a year. This generous dose of Fed credit has fueled the 5-year superboom on Wall Street.
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The Bubble
28 April 1998 1998 Ron Paul 39:21
2. Inflated currency and artificially low interest rates result in mal-investment that produces over capacity in one area or another.
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The Bubble
28 April 1998 1998 Ron Paul 39:31
In its effort to re-energize the economy, the Bank of Japan is increasing its reserves at a 51 percent rate. This may be the greatest effort to “inflate” and economy back to health in all of history. Japan has inflated over the years and will not permit a full correction of their mal-investment. The Bank of Japan is doing everything possible to inflate again, but even with interest rates below 1 percent there are few takers.
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The Bubble
28 April 1998 1998 Ron Paul 39:40
Central bankers have also become more sophisticated in the balancing act between inflation and deflation. They are great technicians and are quite capable of interpreting events and striking a balance between these two horrors. This does not cancel out the basic flaw of a fiat currency; central bankers cannot replace the marketplace for determining interest rates and the proper amount of credit the economy needs.
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The Bubble
28 April 1998 1998 Ron Paul 39:46
It must be understood that politicians and the pressure of the special interests in Washington demand that the current policies of spending, deficits, artificially low interest rates and easy credit will not change. It took the complete demise of the Soviet-Communist system before change came there. But be forewarned: change came with a big economic bang not a whimper. Fortunately that event occurred without an armed revolution . . . so far. The amazingly sudden, economic events occurring in East Asia could still lead to some serious social and military disturbances in that region.
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FDIC Problem
13 May 1998 1998 Ron Paul 51:6
We have to think about how we got here. In the 1920s, the Federal Reserve created a lot of credit. They created a boom and a booming stock market and good times. Then the Federal Reserve raised the interest rates and there was a stock market crash and a depression. And out of the depression came the desire to regulate banking and commerce. That caused the depression, which was erroneous, because the cause of the depression was excessive credit and then a deflated bubble, which should be all laid at the doorstep of the Federal Reserve.
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Every Currency Crumbles
24 June 1998 1998 Ron Paul 65:2
Mr. James Grant is the editor of Grant’s Interest Rate Observer, a financial publication, and editorial director of Grant’s Municipal Bond Observer and Grant’s Asia Observer. He has also authored several books including the biographical “Bernard Baruch: Adventures of a Wall Street Legend”, the best financial book of the year according to The Financial Times “Money of the Mind: Borrowing and Lending in America from the Civil War to Michael Milken”, “Minding Mr. Market: Ten Years on Wall Street with Grant’s Interest Rate Observer” and “The Trouble with Prosperity: The Loss of Fear, the Rise of Speculation, and the Risk to American Savings”. He is a frequent guest on news and financial programs, and his articles appear in a variety of publications.
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Banking Regulations
4 August 1998 1998 Ron Paul 93:10
These regulations add to the costs of operations of financial institutions. This cost is passed on to consumers in the form of higher interest rates and additional fees. These regulations impose a disproportionate burden on smallers institutions, stifles the possibility of new entrants into the financial sector, and contributes to a consolidation and fewer market participants of the industry. Consumers need additional choices, not congressionally-imposed limits on choices.
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Worldwide Financial Crisis
10 September 1998 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.
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Worldwide Financial Crisis
10 September 1998 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.
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Revamping The Monetary System
24 September 1998 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 is what the markets interpreted his statement to mean. And the stock market responded favorably by going up 257 points.
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Revamping The Monetary System
24 September 1998 1998 Ron Paul 102:11
I would 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. This, of course, will lower interest rates in the short run and this will give a boost to a few people in trouble and it will bail out certain individuals.
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World Financial Markets
1 October 1998 1998 Ron Paul 104:2
The mess we are witnessing in the world today was a predictable event. Artificially low interest rates and easy credit causes malinvestment, overcapacity, excessive borrowing and uncontrolled speculation.
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World Financial Markets
1 October 1998 1998 Ron Paul 104:4
There have been no restraints on the world monetary managers to expand their money supplies, fix short-term interest rates or deliberately debase their currencies. Although.
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World Financial Markets
1 October 1998 1998 Ron Paul 104:7
More Federal Reserve fixing of interest rates and credit expansion can hardly solve our problems when this has been precisely the cause of the mess in which we currently find ourselves.
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World Financial Markets
1 October 1998 1998 Ron Paul 104:8
Price fixing of interest rates contradicts the basic tenets of capitalism. Let it no more be said that today’s mess with financial markets is a result of capitalism’s shortcomings. Nothing is further from the truth. Allowing the market to operate even under today’s dangerous conditions is still the best option for dealing with hedge fund’s gambling mistakes, both current and future.
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World Financial Markets
1 October 1998 1998 Ron Paul 104:10
No amount of regulation could have prevented or in the future prevent the inevitable mistakes made in an economy that is misled by rigged interest rates or a money supply dictated by central planners in a fiat money system. Hedge fund operations, because they are international in scope, are impossible to regulate and for the current ongoing crisis it is too late anyway.
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World Financial Markets
1 October 1998 1998 Ron Paul 104:12
Our problems today should not be used to justify a worldwide central bank, as has been proposed. What we need is sound money without the central planning efforts of a Federal Reserve system fixing interest rates and regulating the money supply. Let us give freedom a chance.
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Monetary Policy
16 October 1998 1998 Ron Paul 120:9
That is what we are witnessing today. The world-wide fragile financial system is now collapsing and tragically the only cry is for more credit inflation because the cause of our dilemma is not understood. Attempts at credit stimulation with interest rates below 1 percent is doing nothing for Japan’s economy and for good reasons. it is the wrong treatment for the wrong diagnosis.
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Monetary Policy
16 October 1998 1998 Ron Paul 120:14
First, the Federal Reserve should be denied the power to fix interest rates and buy government debt. It should not be central economic planner through manipulation of money and credit.
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Freedom And Privacy Restoration Act
6 January 1999 1999 Ron Paul 1:8
A more recent assault on privacy is a regulation proposed jointly by the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Reserve, known as “Know Your Customer.” If this regulation takes effect in April 2000, financial institutions will be required not only to identify their customers but also their source of funds for all transactions, establish a “profile” and determine if the transaction is “normal and expected.” If a transaction does not fit the profile, banks would have to report the transaction to government regulators as “suspicious.” The unfunded mandate on financial institutions will be passed on to customers who would have to pay higher ATM and other fees and higher interest rates on loans for the privilege of being spied on by government-inspired tellers.
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Congress Relinquishing The Power To Wage War
2 February 1999 1999 Ron Paul 4:75
A hint of what can happen when the world gets tired of holding too many of our dollars was experienced in the dollar crisis of 1979 and 1980, and we saw at that time interest rates over 21 percent. There is abundant evidence around warning us of the impending danger. According to Federal Reserve statistics, household debt reached 81 percent of personal income in the second quarter of 1998. For 20 years prior to 1985, household debt averaged around 50 percent of personal income. Between 1985 and 1998, due to generous Federal Reserve credit, competent American consumers increased this to 81 percent and now it is even higher. At the same time, our savings rate has dropped to zero percent.
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Congress Relinquishing The Power To Wage War
2 February 1999 1999 Ron Paul 4:89
It is easy to see why Congress, with its own insatiable desire to spend money and perpetuate a welfare and military state, cooperates with such a system. A national debt of $5.6 trillion could not have developed without a willing Federal Reserve to monetize this debt and provide for artificially low interest rates. But when the dollar crisis hits and it is clearly evident that the short-term benefits were not worth it, we will be forced to consider monetary reform.
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Campaign Finance Reform
14 June 1999 1999 Ron Paul 58:3
There is tremendous incentive for every special interest group to influence government. Every individual, bank or corporation that does business with government invests plenty in influencing government. Lobbyists spend over $100 million per month trying to influence Congress. Taxpayers’ dollars are endlessly spent by bureaucrats in their effort to convince Congress to protect their own empires. Government has tremendous influence over the economy and financial markets through interest rate controls, contracts, regulations, loans and grants. Corporations and others are forced to participate in the process out of greed, as well as self defense, since that is the way the system works.
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Campaign Finance Reform
14 June 1999 1999 Ron Paul 58:16
There’s tremendous incentive for every special interest group to influence government. Every individual, bank or corporation that does business with government invests plenty in influencing government. Lobbyists spend over a hundred million dollars per month trying to influence Congress. Taxpayers dollars are endlessly spent by bureaucrats in their effort to convince Congress to protect their own empires. Government has tremendous influence over the economy, and financial markets through interest rate controls, contracts, regulations, loans, and grants. Corporations and others are “forced” to participate in the process out of greed as well as self defense— since that’s the way the system works. Equalizing competition and balancing power such as between labor and business is a common practice. As long as this system remains in place, the incentive to buy influence will continue.
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Campaign Finance Reform
14 September 1999 1999 Ron Paul 97:3
There’s tremendous incentive for every special interest group to influence government. Every individual, bank or corporation that does business with government invests plenty in influencing government. Lobbyists spend over a hundred million dollars per month trying to influence Congress. Taxpayers dollars are endlessly spent by bureaucrats in their effort to convince Congress to protect their own empires. Government has tremendous influence over the economy, and financial markets through interest rate controls, contracts, regulations, loans, and grants. Corporations and others are ‘forced’ to participate in the process out of greed as well as self-defense — since that’s the way the system works. Equalizing competition and balancing power such as between labor and business is a common practice. As long as this system remains in place, the incentive to buy influence will continue.
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Conference Report On S. 900, Gramm-Leach-Bliley Act
4 November 1999 1999 Ron Paul 113:3
Federal Reserve Governor Edward Gramlich today joined many others who are concerned about the strength of the economy when he warned that the low U.S. savings rate was a cause for concern. Coupled with the likely decline in foreign investment in the United States, he said that the economy will require some potentially “painful” adjustments — some combination of higher exports, higher interest rates, lower investment, and/or lower dollar values.
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A Republic, If You Can Keep It
31 January 2000 2000 Ron Paul 2:20
Government statistics are continuously reaffirming our great prosperity with evidence of high and rising wages, no inflation, and high consumer confidence and spending. The U.S. Government still enjoys good credit and a strong currency in relationship to most other currencies of the world. We have no trouble financing our public nor private debt. Housing markets are booming and interest rates remain reasonable by modern day standards. Unemployment is low.
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A Republic, If You Can Keep It
31 January 2000 2000 Ron Paul 2:84
Recently, the Secretary of HUD, using public funds to sue gun manufacturers, claimed this is necessary to solve the problems of crime which government housing perpetuates. If a government agency, which was never meant to exist in the first place under the Constitution, can expand their role into the legislative and legal matters without the consent of the Congress, we indeed have a serious problem on our hands. The programs are bad enough in themselves but the abuse of the rule of law and ignoring the separation of powers makes these expanding programs that much more dangerous to our entire political system and is a direct attack on personal liberty. If one cares about providing the maximum best housing for the maximum number of people, one must consider a free market approach in association with a sound, nondepreciating currency. We have been operating a public housing program directly opposite to this and along with steady inflation and government promotion of housing since the 1960s, the housing market has been grossly distorted. We can soon expect a major downward correction in the housing industry prompted by rising interest rates.
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A Republic, If You Can Keep It
31 January 2000 2000 Ron Paul 2:99
It is also advantageous for the politicians to ignore the negative effects from such a monetary arrangement, since they tend to be hidden and disseminated. A paper money system attracts support from various economic groups. Bankers benefit from the float that they get with the fractional reserve banking that accompanies a fiat monetary system. Giant corporations who get to borrow large funds at below market interest rates enjoy the system and consistently call for more inflation and artificially low interest rates. Even the general public seems to benefit from the artificial booms brought about by credit creation, with lower interest rates allowing major purchases like homes and cars.
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A Republic, If You Can Keep It
31 January 2000 2000 Ron Paul 2:109
The special benefits of foreigners taking our inflated dollars for low priced goods and then loaning them back to us will eventually end. The dollar must fall, interest rates must rise, price inflation will accelerate, the financial asset bubble will burst, and a dangerous downturn in the economy will follow.
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A Republic, If You Can Keep It – Part 2
2 February 2000 2000 Ron Paul 5:10
We know, of course, it has been involved in the past 50 years in assassinations and government overthrows on frequent occasions. The Federal Reserve operation, which works hand in hand with the administration, is not subject to congressional oversight. The Fed manipulates currency exchange rates, controls short-term interest rates, and fixes the gold price, all behind closed doors.
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Manipulating Interest Rates
May 15, 2000 2000 Ron Paul 36:6
* A central bank that has no restraints placed on it is always available to the politicians who spend endlessly for reelection purposes. When the private sector lacks its appetite to lend sufficiently to the government, the Federal Reserve is always available to buy treasury debt with credit created out of thin air. At the slightest hint that interest rates are higher than the Fed wants, its purchase of debt keeps interest rates in check; that is, they are kept lower than the market rate. Setting interest rates is an enormous undertaking. It’s price fixing and totally foreign to the principles of free market competition.
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Manipulating Interest Rates
May 15, 2000 2000 Ron Paul 36:8
* But that’s a fallacy. There is always a cost. Artificially low interest rates prompt lower savings, over-capacity expansion, mal-investment, excessive borrowing, speculation, and price increases in various segments of the economy. And since money creation is not wealth creation, it inevitably leads to a lower value for the currency. The inflation always comes to an end with various victims, many of whom never enjoyed the benefits of the credit creation and deficit spending.
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Manipulating Interest Rates
May 15, 2000 2000 Ron Paul 36:9
* This silly notion of money and credit gives rise to the conventional wisdom that once the economy gets really rolling, it’s time for the Fed to stop economic growth. The false supposition is that economic growth causes higher prices and higher labor costs, and these evils must be prevented by tightening credit and raising interest rates. But these are only the consequences of the previous monetary expansion and blaming rising prices or higher labor costs is done only to distract from the real culprit-monetary inflation by the Federal Reserve.
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Manipulating Interest Rates
May 15, 2000 2000 Ron Paul 36:11
* There are some who see this fallacy and object to deliberately slowing the economy but instead clamor for even more monetary growth to keep interest rates low and the economy booming. But this is just as silly because that leads to even more debasement of the currency, rising prices, and instead of lowering interest rates will in time, due to inflationary expectation, actually raise rates.
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The Dollar And Our Current Account Deficit
May 16, 2000 2000 Ron Paul 37:3
* When trade imbalances are not corrected, sudden devaluations, higher interest rates, and domestic inflation are forced on the country that has most abused its monetary power. This was seen in 1997 in the Asian crisis, and precarious economic conditions continue in that region.
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INTERNATIONAL TRADE
May 23, 2000 2000 Ron Paul 39:6
The Federal Reserve believes that prosperity causes high prices and rising wages, thus causing it to declare war on a symptom of its own inflationary policy, deliberately forcing an economic slowdown, a sad and silly policy, indeed. The Fed also hopes that higher interest rates will curtail the burgeoning trade deficit and prevent the serious currency crisis that usually results from currency-induced trade imbalances. And of course, the Fed hopes to do all this without a recession or depression.
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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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CONGRESS IGNORES ITS CONSTITUTIONAL RESPONSIBILITY REGARDING MONETARY POLICY
October 11, 2000 2000 Ron Paul 84:7
The Federal Reserve, which maintains a monopoly control over the money supply, credit and interest rates, is indeed the culprit and should be held accountable. But the real responsibility falls on the Congress, for it is Congress’ neglect that permits the central bank to debase the dollar at will.
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WARNING ABOUT FOREIGN POLICY AND MONETARY POLICY
October 12, 2000 2000 Ron Paul 86:4
Most good economists recognize that inflation is a consequence of monetary policy; as one increases the supply of money, it inflates the currency. This distorts interest rates, and it distorts the markets. Sometimes this goes into goods and services, and other times these excessive funds will go into marketplaces and distort the value of stocks and bonds.
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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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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:3
* Soon we will hear from many, we have already heard some from the financial circles as well as from politicians, to lower interest rates. This will keep the economy from turning down. It will prevent the recession from coming. And if we do have a recession, it is always said, what you do is you lower the interest rates. But dwelling on the interest rates and not talking about what it takes to lower interest rates I think is a serious mistake.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:4
* The only way the Federal Reserve can lower interest rates is by inflating the money supply, increasing the money supply, which is the cause of our problems. So if the cause of our problem is the inflation, increasing the money supply which causes a boom, we can hardly solve our problems by further inflating. And then, too, there is a period of time in the business cycle where inflating the money supply or lowering interest rates do not get the response that many people hope for.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:5
* Take, for instance, what is happening in Japan today. There is no response whatsoever. They take interest rates down below one percent, and they cannot generate economic activity to really get them out of their slump.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:6
* The other irony of all this is that when we have an economic boom, another reason given for raising interest rates to slow up the economy is to stop the inflation. This is fallacious thinking because the inflation comes from the money supply. The idea that economic growth and prosperity and productivity causes inflation, that is the price type of inflation, is wrong. If we have good productivity, prices go down, they do not go up. So the whole notion that we have to slow up the economy in order to prevent inflation is absolutely incorrect.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:9
* Now, if in the midst of a recession the Federal Reserve decides that they want to lower interest rates but the dollar is also dropping and we lower interest rates, we cause the dollar to go down and price inflation will occur because of that. So it is not quite so simple as saying, well, let us just tell the Fed what to do, lower the interest rates and it will solve our problems.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:14
* We will soon be hearing a lot about interest rates. There will be a loud clamor from all quarters for the Fed to lower interest rates. It will be argued that it is necessary in order to help stop the stock market slide/crash and also to stimulate a sagging economy.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:15
* What we must remember though, is that every time someone pressures the Fed to lower interest rates, they are saying to the Fed that the money supply must be inflated. The only tool the Fed has for lowering interest rates is to increase the supply of money. They are arguing the case for further systematic and deliberate debasement of the US dollar. Those who chant for lower interest rates are literally attacking the dollar.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:16
* And yet, depending on many variables, a deliberate attempt by the Federal Reserve to lower interest rates may instead lead to higher interest rates and precipitate a period of accelerating price inflation. Instead of boosting the stock market, this effort can do the opposite by producing conditions that will lower the stock market and do nothing to avert the economic slump that more people are now worried about.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:24
* The big debate already started in the financial and political circles is when, how much, and how quickly the Federal Reserve should lower interest rates. Indeed all will clamor to lower rates to revive the economy again. With the signs of rising prices in many sectors, especially energy, and in spite of the weak economy we can expect the Federal Reserve chairman to issue precautionary statements. He will reiterate that he must watch out for the resurgence of (price) inflation. In spite of his statements about concerns for inflation, if the stock market slumps and the economic slowdown is significant enough, we can be certain of one thing, the money supply will continue to grow rapidly in an attempt to keep interest rates low. But Mr. Greenspan will never admit that inflating is exactly what he’s been generously doing for the past 13 years.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:25
* A short time after Chairman Greenspan took over the reigns of the Federal Reserve the stock market crash of 1987 prompted him to alleviate concerns with a heavy dose of monetary inflation. Once again, in the slump of 1991 and 1992, he again re-ignited the financial bubble by more monetary inflation. There was no hesitation on Mr. Greenspan’s part to inflate as necessary to alleviate the conditions brought about by the Mexican financial crisis, the Asian crisis, the Russian ruble crisis, and with the Long-Term Capital Management crisis. Just one year ago the non-existent Y2K crisis prompted huge, unprecedented monetary inflation by the Federal Reserve. All these efforts kept interest rates below the market rate and contributed to the financial bubble that is now starting to deflate. But, there is no doubt that this monetary inflation did maintain an economy that seemed like it would never quit growing. Housing markets thrived, the stock market and bond market thrived, and in turn, the great profits made in these areas, especially gains made by stock market transactions, produced profits that inflated greatly the revenues that flowed into the Treasury. The serious problem that we now face, a collapsing stock market and a rapidly weakening economy, was caused by inflating the money supply along with artificially low interest rates. More inflation and continuing the policy of artificially low interest rates can’t possibly be the solution to the dilemma we face.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:26
* We should never blame economic growth as the culprit. Instead artificial growth, mal-investment, overcapacity, speculation, and excessive debt that comes from systematic monetary inflation should be blamed, since these are all a result of Federal Reserve Board policy. Let there be no doubt political and financial leaders will demand lower interest rates in order to alleviate the conditions that are developing. But just because a boom can come from generous Fed credit, it doesn’t mean the bubble economy can be maintained or re-inflated by easy credit once a correction sets in.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:27
* Besides, Alan Greenspan knows full well that the scenario we are now experiencing can be made worse by lowering interest rates. Under the conditions we are facing it’s very likely the dollar will weaken and deliberately lowering interest rates will accelerate this trend. Price inflation, which the Fed claims it is so concerned about, will not necessarily go away even with a weak economy. And the one thing we will come to realize that even the best of all central bankers, Alan Greenspan, will not be able to determine interest rates at all times of the business cycle. Inflation premiums, confidence, the value of the dollar, and political conditions all can affect interest rates and these are out of the control of the Federal Reserve Board.
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ECONOMIC UPDATE
December 4, 2000 2000 Ron Paul 97:28
* Congress definitely should be concerned about these matters. Budgetary planning will get more difficult as the revenues spiral downward and spending does the opposite. Interest on the national debt will continue and will rise as interest rates rise. The weak dollar, lower stock markets and inflation can affect every fixed income citizen, especially the Social Security beneficiaries. We can expect the World Trade Organization=s managed trade war will actually get much worse under these conditions. Military conflict is not out of the question under the precarious conditions that are developing. Oil supplies are obviously not secure, as we have already seen the run up of prices to dangerously high levels.
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CHALLENGE TO AMERICA: A CURRENT ASSESSMENT OF OUR REPUBLIC —
February 07, 2001 2001 Ron Paul 7:41
Although computer technology has been quite beneficial to the economy, in some ways these benefits have been misleading by hiding the ill effects of central-bank manipulation of interest rates and by causing many to believe that the usual business-cycle correction could be averted. Instead, delaying a correction that is destined to come only contributes to greater distortions in the economy, thus requiring an even greater adjustment.
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CHALLENGE TO AMERICA: A CURRENT ASSESSMENT OF OUR REPUBLIC —
February 07, 2001 2001 Ron Paul 7:43
Western leaders for most of the 20th Century have come to accept a type of central planning they believe is not burdened by the shortcomings of true socialist-type central planning. Instead of outright government ownership of the means of production, the economy was to be fine-tuned by fixing interest rates (FED Funds Rates), subsidizing credit (Government Sponsored Enterprises), stimulating sluggish segments of the economy (Farming and the Weapons Industry), aiding the sick (Medicaid and Medicare), federally managing education (Department of Education), and many other welfare schemes.
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CHALLENGE TO AMERICA: A CURRENT ASSESSMENT OF OUR REPUBLIC —
February 07, 2001 2001 Ron Paul 7:45
In an economic downturn, a large majority of our political leaders believe that the ill effects of recession can be greatly minimized by monetary and fiscal policy. Although cutting taxes is always beneficial, spending one’s way out of a recession is no panacea. Even if some help is gained by cutting taxes or temporary relief given by an increase in government spending, they distract from the real cause of the downturn: previously pursued faulty monetary policy. The consequences of interest-rate manipulation in a recession-along with tax and spending changes-are unpredictable and do not always produce the same results each time they’re used. This is why interest rates of less than 1% and massive spending programs have not revitalized Japan’s economy or her stock market. We may well be witnessing the beginning of a major worldwide economic downturn, making even more unpredictable the consequence of conventional western-style central bank tinkering.
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CHALLENGE TO AMERICA: A CURRENT ASSESSMENT OF OUR REPUBLIC —
February 07, 2001 2001 Ron Paul 7:47
It’s important to understand how we got ourselves into this mess. The blind faith that wealth and capital can be created by the central bank’s creating money and credit out of thin air, using government debt as its collateral, along with fixing short-term interest rates, is a myth that must one day be dispelled. All the hopes of productivity increases in a dreamed-about new-era economy cannot repeal eternal economic laws.
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CHALLENGE TO AMERICA: A CURRENT ASSESSMENT OF OUR REPUBLIC —
February 07, 2001 2001 Ron Paul 7:55
During the past 30 years in the post-Bretton Woods era, worldwide sentiment has permitted us to inflate our money supply and get others to accept the dollar as if it were as good as gold. This convenient arrangement has discouraged savings, which are now at an historic low. Savings in a capitalist economy are crucial for furnishing capital and establishing market interest rates. With negative savings and with the FED fixing rates by creating credit out of thin air and calling it capital, we have abandoned a necessary part of free-market capitalism, without which a smooth and growing economy is sustainable.
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CHALLENGE TO AMERICA: A CURRENT ASSESSMENT OF OUR REPUBLIC —
February 07, 2001 2001 Ron Paul 7:58
The mantra now is for the FED to quickly lower short-term interest rates to stimulate the economy and alleviate a liquidity crisis. This policy may stimulate a boom and may help in a mild downturn, but it doesn’t always work in a bad recession. It actually could do great harm since it could weaken the dollar, which in turn would allow market forces instead to push long-term interest rates higher. Deliberately lowering interest rates isn’t even necessary for the dollar to drop, since our policy has led to a current-account deficit of a magnitude that demands the dollar eventually readjust and weaken.
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CHALLENGE TO AMERICA: A CURRENT ASSESSMENT OF OUR REPUBLIC —
February 07, 2001 2001 Ron Paul 7:59
A slumping stock market will also cause the dollar to decline and interest rates to rise. Federal Reserve Board central planning through interest-rate control is not a panacea. It is instead the culprit that produces the business cycle. Government and FED officials have been reassuring the public that no structural problems exists, citing no inflation and a gold price that reassures the world that the dollar is indeed still king.
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CHALLENGE TO AMERICA: A CURRENT ASSESSMENT OF OUR REPUBLIC —
February 07, 2001 2001 Ron Paul 7:60
The FED can create excess credit, but it can’t control where it goes as it circulates throughout the economy; nor can it dictate value either. Claiming that a subdued government-rigged CPI and PPI proves that no inflation exists is pure nonsense. It is well established that, under certain circumstances, new credit inflation can find its way into the stock or real estate market, as it did in the 1920s, while consumer prices remain relatively stable. This does not negate the distortion inherit in a system charged with artificially low interest rates. Instead it allows the distortion to last longer and become more serious, leading to a bigger correction.
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CHALLENGE TO AMERICA: A CURRENT ASSESSMENT OF OUR REPUBLIC —
February 07, 2001 2001 Ron Paul 7:64
Recent deterioration of the junk-bond market indicates how serious the situation is. Junk bonds are now paying 9% to 10% more than short-term government securities. The quality of business loans is suffering, while more and more corporate bonds are qualifying for junk status. The FED tries to reassure us by attempting to stimulate the economy with low short-term FED fund rates at the same time interest rates for businesses and consumers are rising. There comes a time when FED policy is ineffective, much to everyone’s chagrin.
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CHALLENGE TO AMERICA: A CURRENT ASSESSMENT OF OUR REPUBLIC —
February 07, 2001 2001 Ron Paul 7:68
Much else related to artificially low interest rates goes unnoticed. An overpriced stock market, overcapacity in certain industries, excesses in real-estate markets, artificially high bond prices, general mal-investments, excessive debt, and speculation all result from the generous and artificial credit the Federal Reserve pumps into the financial system. These distortions are every bit, if not more, harmful than rising prices. As the economy soars from the stimulus effect of low interest rates, growth and distortions compound themselves. In a slump the reverse is true, and the pain and suffering is magnified as the adjustment back to reality occurs.
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The Economy
February 13, 2001 2001 Ron Paul 13:3
Raising interest rates 6 times in 1999-2000 has had an effect and the central planners are now worried. Falsely, they believe that if only the money spigot is once again turned on, all will be well. That will prove to be a pipe dream.
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The Economy
February 13, 2001 2001 Ron Paul 13:5
And what’s happening to employment conditions? They’re deteriorating rapidly. Economist Ed Hyman, reported that 270,000 people lost their jobs in January, a 678% increase over a year ago. A growing number of economists are now doubtful that productivity growth will save us from the correction that many free market economists predicted would come as an inevitable consequence of the interest rate distortions that Federal Reserve policy causes.
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The Economy
February 13, 2001 2001 Ron Paul 13:6
Instead of blind faith in the Federal Reserve to run the economy, we should become more aware of Congress’s responsibility for maintaining a sound dollar and removing the monopoly power of our central bank to create money and credit out of thin air and fix short term interest rates—which is the real cause of all our economic downturns.
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The Economy
February 13, 2001 2001 Ron Paul 13:7
Between 1995 and today, the Greenspan Fed increased the money supply as measured by (MZM) by $1.9 trillion or a 65% increase. There is no reason to look any further for the explanation of why the economy is slipping with labor costs rising, energy costs soaring, and medical and education costs skyrocketing, while the stock market is disintegrating. Until we look at the unconstitutional monopoly power the Federal Reserve has over money and credit we can expect a continuation of our problems. Demanding lower interest rates is merely insisting the Federal Reserve deliberately create even more credit, which caused the problem in the first place. We cannot restore soundness to the dollar by debasing the dollar—which is what lowering interest rates is all about—printing more money.
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The Beginning of the End of Fiat Money
March 13, 2001 2001 Ron Paul 18:8
Politicians and economists are very familiar with business cycles with most assuming that slumps erupt as: 1.) A natural consequence of capitalism, 2.) An act of God, 3.) Or as a result of Fed driven high interest rates. That is to say, the Fed did not engage in enough monetary debasement, becomes the most common complaint by Wall Street pundits and politicians.
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Manipulation Of Interest Rates Cause Economic Problems
20 March 2001 2001 Ron Paul 22:1
Mr. PAUL. Mr. Speaker, today the Federal Reserve lowered interest rates by a half a percentage point. They have been asked to lower this interest rates by just about everybody in the country. Whether they are investors or politicians, everybody literally has been screaming at the Fed and Alan Greenspan to lower the interest rates, lower the interest rates.
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Manipulation Of Interest Rates Cause Economic Problems
20 March 2001 2001 Ron Paul 22:2
It was anticipated that he would, and he did. He lowered the interest rates by 50 basis points. The stock market promptly went down 236 points. So obviously just lowering interest rates is not the solution to the problems we face. As a matter of fact, I believe it is the problem.
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Manipulation Of Interest Rates Cause Economic Problems
20 March 2001 2001 Ron Paul 22:3
Interest rates have been manipulated by the Federal Reserve as long as I can remember, especially in the last 30 years since we have had a total fiat monetary system. So it is the manipulation of interest rates that causes a problem.
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Manipulation Of Interest Rates Cause Economic Problems
20 March 2001 2001 Ron Paul 22:4
In a free market economy, you do not have a central bank pretending it has knowledge it does not have, that it knows exactly what the money supply should be and what interest rate should be. That is a prescription for disaster; and it leads to booms and busts, speculations in the stock markets, crashes in the stock markets. This is a wellknown phenomenon. It has been with us since 1913, since we have had the Federal Reserve. We have seen it in the speculation in the 1920s and the depression of the 1930s. It is ongoing.
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Manipulation Of Interest Rates Cause Economic Problems
20 March 2001 2001 Ron Paul 22:6
To lower interest rates, a central bank has to increase the money. That is debasement. That is devaluing the money deliberately. In the old days, when the king would do this, they would clip coins. Literally coin debasement, stealing value from coinage in the old days was a capital crime. Today, though, it is accepted practice in all economies of the world. We have had no linkage of any currency of the world in the last 30 years to anything of real value.
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Manipulation Of Interest Rates Cause Economic Problems
20 March 2001 2001 Ron Paul 22:8
Take a look at what is happening in Japan today. Japan lowered their interest rates, too. They have been doing this for a long time. They are down to 0 percent, and nothing seems to be happening. Their stock market is at a level it was 16 years ago. We have to decide whether or not we may be moving into a similar situation. I think it is a very serious problem.
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Manipulation Of Interest Rates Cause Economic Problems
20 March 2001 2001 Ron Paul 22:9
We talk about interest rates. We talk about stimulating the economy. But we really do not talk about the problem, and that is the monetary system and the nature of the dollar.
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Addressing Monetary Problems
22 March 2001 2001 Ron Paul 23:2
Some people claim that they are not quite sure why markets go up and all of a sudden crash; and others say if only Alan Greenspan would just print more money, inflate the currency faster, lower the interest rates, all would be well. But I do not think it is that simple.
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Addressing Monetary Problems
22 March 2001 2001 Ron Paul 23:4
Only a free market can tell us what interest rates should be or what the money supply should be. But we have become dependent on a Federal Reserve system that pretends to know all these things, and we have allowed Alan Greenspan to believe that he can regulate the entire economy as well as the stock market by the Open Market Committee.
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Addressing Monetary Problems
22 March 2001 2001 Ron Paul 23:11
This type of a monetary system also encourages us to do things unwisely. When interest rates are lower than they are supposed to be, we borrow more money and we do not save as much money, so savings has a negative rate. Yet people are way in debt, business people are in debt, and then business people are actually encouraged to do things that are not wise. They overbuild; they build into the system overcapacity and mal-investment which eventually has to be cleansed out of the system.
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Inflation Is Still With Us
3 May 2001 2001 Ron Paul 30:7
Rising prices and the economic slowdown must be laid at the feet of the Federal Reserve. Likewise, the existing financial bubble is a consequence of the same policy of monetary expansion and artifically low interest rates. Although the NASDAQ bubble has already partially deflated, the entire world financial system suffers from the same distortion; and a lot more adjustment is required. Merely re-inflating with monetary expansion and manipulating interest rates will not solve the problems of debt, mal-investment and overcapacity that plague the system.
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Inflation Is Still With Us
3 May 2001 2001 Ron Paul 30:8
Mismanaging world fiat currencies and working to iron out the trade imbalances that result, through a worldwide managed trade organization, will not suffice. We must one day address the subject of sound money and free market interest rates, where interest rates are not set by the central banks of the world.
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Export-Import Bank
24 July 2001 2001 Ron Paul 61:13
I would strongly urge a yes vote on this amendment and do not support this effort to benefit the big companies and hurt the little guys. The little guys are the ones who lose this line of credit and push their interest rates up.
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The US Dollar and the World Economy
September 6, 2001 2001 Ron Paul 75:10
Instead, Congress chooses to blame the analysts for misleading investors . The analysts may not be entirely blameless , but their role in creating the bubble is minimal compared to the misleading information that the Federal Reserve has provided, with artificially low interest rates and a financial market made flush with generous new credit at every sign of a correction over the past ten years.
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The US Dollar and the World Economy
September 6, 2001 2001 Ron Paul 75:20
Regardless of whether the experts demand a weak dollar or a strong dollar, each inevitably demands lower interest rates, hoping to spur the economy and save the stock market from crashing. But one must remember that the only way the Federal Reserve can lower interest rates is to inflate the currency by increasing the money supply and by further debasing the currency. In the long term, the dollar is always weakened, even if the economy is occasionally stimulated on a short-run basis.
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The US Dollar and the World Economy
September 6, 2001 2001 Ron Paul 75:21
Economic growth can hide the ill effects of monetary inflation by holding some prices in check. But it can’t prevent the over-capacity and mal-investment which causes the economic downturn. Of course, the central bankers cling to the belief that they can somehow prevent the ugly corrections known as recessions. Economic growth, when artificially stimulated by monetary growth and low interest rates, generates the speculation we’ve seen in the stock, bond and real estate markets, along with excessive debt. Once the need for rectifying the over-capacity is recognized by the market, these imbalances are destined to be wiped out. Prolonging the correction phase with the Fed’s efforts to re-inflate by diligently working for a soft landing, or even to prevent a recession, only postpones the day the economy can return to sustained growth. This is a problem the United States had in the 1930s and one that Japan has experienced for more than a decade, with no end in sight.
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The US Dollar and the World Economy
September 6, 2001 2001 Ron Paul 75:27
The GSEs, made up of Fannie Mae, Freddie Mac, and the Federal Home Loan Bank, have managed to keep the housing market afloat, in contrast to the more logical slowdown in hotel and office construction. This spending through the GSEs has also served as a vehicle for consumption spending. This should be no surprise, considering the special status that GSEs enjoy, since their implied line of credit to the US Treasury keeps interest rates artificially low. The Clinton administration encouraged growth in housing loans that were financed through this system.
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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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The US Dollar and the World Economy
September 6, 2001 2001 Ron Paul 75:37
The deception regarding price increases is supposed to reassure us and may do so for a while. The Fed never admits it, and the Congress disregards it out of ignorance, but the serious harm done by artificially low interest rates--leading to mal-investment, overcapacity, excessive debt and speculation causes the distortions that always guarantee the next recession.
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The US Dollar and the World Economy
September 6, 2001 2001 Ron Paul 75:40
Someday, stable money based on the gold standard must be reconsidered. Stable money is a constitutional responsibility of Congress. The Federal Reserve Board’s goal of stable prices, economic growth and low interest rates, through centralized economic planning by manipulating money and credit, is a concoction of 20 th Century Keynesian economics. These efforts are not authorized by the Constitution, and are economically detrimental.
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The US Dollar and the World Economy
September 6, 2001 2001 Ron Paul 75:44
If, heaven forbid, the economy sinks as low and for as long as many free market economists believe, what policy changes must we consider? Certainly the number one change ought to be to reject the ideas that created the crisis. But rejecting old ways that Congress and the people are addicted to is not easy. Many people believe that government programs are free. The clamor for low interest rates, (more monetary inflation) by virtually all public officials and prominent business and banking leaders is endless. And, the expectation for government to do something for every economic malady-even if ill-advised government policy has created the problem-drives this seductive system of centralized planning that ultimately undermines prosperity. A realization that we cannot continue our old ways may well be upon us, and, the inflating, taxing, regulating, and centralized planning programs of the last thirty years must come to an end.
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The US Dollar and the World Economy
September 6, 2001 2001 Ron Paul 75:46
But we must also reject the notion that one man, Alan Greenspan, or any other chairman of the Federal Reserve Board, can know what the proper money supply and interest rates ought to be- only the market can determine that. This must happen if we ever expect to avoid continuous and deeper recessions and to get the economy growing in a healthy and sustainable fashion. It also must happen if we want to preserve free-market capitalism and personal liberty.
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Sometimes The Economy Needs A Setback
10 September 2001 2001 Ron Paul 77:11
Röpke, wrote before the 1946 Employment Act, which directed the United States government to cut recessions short — using tax breaks, for example, or cuts in interest rates — even if these actions stymie a salutary process of economic adjustment. No one doubts the humanity of this law. Yet equally, no one can doubt the inhumanity of a decade-long string a palliatives in Japan, intended to insulate the Japanese people from the consequences of their bubble economy of the 1980’s. Rather than suppressing the bust, the government has only managed to prolong it, for a decade and counting.
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Sometimes The Economy Needs A Setback
10 September 2001 2001 Ron Paul 77:18
James Grant is the editor of Grant’s Interest Rate Observer.
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Foolishness Of Fiat
31 October 2001 2001 Ron Paul 92:6
Printing money is not an answer, yet that is all that is offered. The clamor for low-interest rates by all those who benefit from fiat money has prompted the Fed to create new money out of thin air like never before. Driving the Fed funds rate down from 6.5 percent to 2.5 percent, a level below the price inflation rate, represents nothing short of panic and has done nothing to recharge the economy. But as one would expect, confidence in the dollar is waning.
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Foolishness Of Fiat
31 October 2001 2001 Ron Paul 92:7
I am sure, due to the crisis, a faith in fiat and a failure to understand the business cycle, the Fed will continue with the only thing it knows to do: credit creation and manipulation of interest rates.
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Foolishness Of Fiat
31 October 2001 2001 Ron Paul 92:8
This policy reflects the central bank’s complete ignorance as to the cause of the problem: Credit creation and manipulation of interest rates.
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Statement before the House Capital Markets Subcommittee
Monday, February 4, 2002 2002 Ron Paul 3:5
The Fed consistently increased the money supply (by printing dollars) throughout the 1990s, while simultaneously lowering interest rates. When dollars are plentiful, and interest rates are artificially low, the cost of borrowing becomes cheap. This is why so many Americans are more deeply in debt than ever before. This easy credit environment made it possible for Enron to secure hundreds of millions in uncollateralized loans, loans that now cannot be repaid. The cost of borrowing money, like the cost of everything else, should be established by the free market- not by government edict. Unfortunately, however, the trend toward overvaluation will continue until the Fed stops creating money out of thin air and stops keeping interest rates artificially low. Until then, every investor should understand how Fed manipulations affect the true value of any company and the level of the markets.
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Statement on the Argentine crisis
February 6 2002 2002 Ron Paul 4:4
Despite clear signs over the past several years that the Argentine economy was in serious trouble, the IMF continued pouring taxpayer-subsidized loans with an incredibly low interest rate of 2.6% into the country. In 2001, as Argentina’s fiscal position steadily deteriorated, the IMF funneled over 8 billion dollars to the Argentine government!
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Stimulating The Economy
February 7, 2002 2002 Ron Paul 5:4
Today, we hear from strong advocates of higher taxation, increased spending, higher budget deficits, tougher regulations, bailouts and all kinds of subsidies and support programs as tools to restore economic growth. The Federal Reserve recognized early on the severity of the problems and, over the past year, lowered short-term interest rates an unprecedented 11 times, dropping the Fed funds rate from 6 1/2 % to 1 3/4 %. This has not helped, and none of these other suggestions can solve the economic problems we face either. Some may temporarily help a part of the economy, but the solution to restoring growth lies not in more government but less. It is precisely too much government, and especially manipulation of credit by the Federal Reserve, that precipitated the economic downturn in the first place. Increasing that which caused the recession can’t possibly, at the same time, be the solution.
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Stimulating The Economy
February 7, 2002 2002 Ron Paul 5:5
The magnitude of the distortions of the 1990s brought on by artificially low interest rates orchestrated by the Fed, on top of 30 years of operating with a fiat currency worldwide, suggests that this slowdown will not abort quickly.
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Stimulating The Economy
February 7, 2002 2002 Ron Paul 5:9
In recessions, to remain solvent, consumers ought to tighten their belts, pay off debt, and save. In a free market, this would lower market interest rates to once again make investments attractive. The confusing aspect of today’s economy is that consumers and even businesses continue profligate borrowing, in spite of problems on the horizon. Interest rates, instead of rising, are pushed dramatically downward by the Federal Reserve, creating massive amounts of new credit.
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Stimulating The Economy
February 7, 2002 2002 Ron Paul 5:10
This new credit, according to economic law, must in time push the value of the dollar down and general prices up. When this happens and the dollar is threatened on exchange markets, the cost of living is pushed sharply upward. The central bank is then forced to raise interest rates, as they did in 1979 when the rates hit 21%.
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Stimulating The Economy
February 7, 2002 2002 Ron Paul 5:11
But even before any need to tighten, interest rates may rise or not fall as expected. This has just happened in 2001. Even with Fed fund rates at 40-year lows, the 10 and 30-year rates have not fallen accordingly. Many corporate-bond rates have stayed high, and credit-card rates have stayed in double digits. This happens because the market discounts for debt quality and future depreciation of the dollar.
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Stimulating The Economy
February 7, 2002 2002 Ron Paul 5:14
For over a year, the Fed has been massively inflating the money supply, and there is no evidence that it has done much good. This continuous influx of new credit instead delays the correction that must eventually come- the liquidation of bad debt, and the reduction of overcapacity. This is something Japan has not accomplished in 12 years of interest rates around 1%. The market must be left to eliminate the misdirected investments and allow the sound investments to survive.
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Stimulating The Economy
February 7, 2002 2002 Ron Paul 5:65
11. The economic ramifications of our war on terrorism are difficult to ascertain but could be quite significant. Although the recession was obviously not caused by the attacks, the additional money spent and the effect of all the new regulations cannot help the recovery. When one adds up the domestic costs, the military costs and the costs of new regulations, we can be certain that deficits are going to grow significantly, and the Federal Reserve will be further pressured to pursue a dangerous monetary inflation. This policy will result in higher rather than lower interest rates, a weak dollar and certainly rising prices. The danger of our economy spinning out of control should not be lightly dismissed.
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So-Called “Campaign Finance Reform” is Unconstitutional
February 13, 2002 2002 Ron Paul 7:8
There is a tremendous incentive for every special interest group to influence government. Every individual, bank, or corporation that does business with government invests plenty in influencing government. Lobbyists spend over a hundred million dollars per month trying to influence Congress. Taxpayer dollars are endlessly spent by bureaucrats in their effort to convince Congress to protect their own empires. Government has tremendous influence over the economy and financial markets through interest rate controls, contracts, regulations, loans, and grants. Corporations and others are “forced” to participate in the process out of greed as well as self-defense- since that’s the way the system works. Equalizing competition and balancing power- such as between labor and business- is a common practice. As long as this system remains in place, the incentive to buy influence will continue.
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Introduction of the Monetary Freedom and Accountability Act
February 13, 2002 2002 Ron Paul 8:21
Howe’s claim contends that the price of gold has been manipulated since 1994 “by conspiracy of public officials and major bullion banks, with three objectives: 1) to prevent rising gold prices from sounding a warning on U.S. inflation; 2) to prevent rising gold prices from signaling weakness in the international value of the dollar; and 3) to prevent banks and others who have funded themselves through borrowing gold at low interest rates and are thus short physical gold from suffering huge losses as a consequence of rising gold prices.”
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Statement on Ending US Membership in the IMF
February 27, 2002 2002 Ron Paul 10:2
For example, Mr. Speaker, the IMF played a major role in creating the Argentine economic crisis. Despite clear signs over the past several years that the Argentine economy was in serious trouble, the IMF continued pouring taxpayer-subsidized loans with an incredibly low interest rate of 2.6% into the country. In 2001, as Argentina’s fiscal position steadily deteriorated, the IMF funneled over 8 billion dollars to the Argentine government!
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Corporate and Auditing Accountability, Responsibility, And Transparency Act of 2002 (CARTA)
24 April 2002 2002 Ron Paul 24:15
The Fed consistently increased the money supply (by printing dollars) throughout the 1990s, while simultaneously lowering interest rates. When dollars are plentiful, and interest rates are artificially low, the cost of borrowing becomes cheap. This is why so many Americans are more deeply in debt than ever before. This easy credit environment made it possible for Enron to secure hundreds of millions in uncollateralized loans, loans that now cannot be repaid. The cost of borrowing money, like the cost of everything else, should be established by the free market — not by government edict. Unfortunately, however, the trend toward overvaluation will continue until the Fed stops creating money out of thin air and stops keeping interest rates artificially low.
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Predictions
24 April 2002 2002 Ron Paul 25:13
An international dollar crisis will dramatically boost interest rates in the United States.
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Statement Opposing Export-Import Bank Subsidies
May 1, 2002 2002 Ron Paul 30:5
Mr. Chairman, there is a market allocation of credit and there is credit allocation by politicians, and that is what we are talking about here. We have credit allocation, and we have mal-investment and over capacity which causes the conditions to exist for the recession. Of course, a lot of this comes from what the Federal Reserve does in artificially lowering interest rates; but this is a compounding problem when government gets in and allocates credit at lower rates. It causes more distortions. This is why allocations to companies like Enron contributes to the bubble that ends up in a major correction.
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Statement Opposing Export-Import Bank Corporate Welfare
May 1, 2002 2002 Ron Paul 31:3
In order to take billions of dollars and give it to one single company, it is taken out of the pool of funds available. And nobody talks about that. There is an expense. Why would not a bank loan when it is guaranteed by the government? Because it is guaranteed. So if you are a smaller investor or a marginal investor, there is no way that you are going to get the loan. For that investor to get the loan, the interest rates have to be higher. So it is a form of credit allocation, and it is also a form of protectionism. We do a lot of talk around here about free trade. Of course, there is a lot of tariff activity going on as well, but this is a form of protectionism. Because some argue, well, this company has to compete and another government subsidizes their company so, therefore, we have to compete. So it is competitive subsidization of special interest corporations in order to do this.
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Beware Dollar Weakness
June 5, 2002 2002 Ron Paul 52:8
There are a lot of reasons the market is pushing down the value of the dollar at this time. But only one is foremost. Current world economic and political conditions lead to less trust in the dollar’s value. Economic strength here at home is questionable and causes concerns. Our huge foreign debt is more than $2 trillion, and our current account deficit is now 4 percent of GDP and growing. Financing this debt requires borrowing $1.3 billion per day from overseas. But these problems are ancillary to the real reason that the dollar must go down in value. For nearly 7 years the U.S. has had the privilege of creating unlimited amounts of dollars with foreigners only too eager to accept them to satisfy our ravenous appetite for consumer items. The markets have yet to discount most of this monetary inflation. But they are doing so now; and for us to ignore what is happening, we do so at the Nation’s peril. Price inflation and much higher interest rates are around the corner.
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Beware Dollar Weakness
June 5, 2002 2002 Ron Paul 52:9
Misplaced confidence in a currency can lead money managers and investors astray, but eventually the piper must be paid. Last year’s record interest rate drop by the Federal Reserve was like pouring gasoline on a fire. Now the policy of the past decade is being recognized as being weak for the dollar; and trust and confidence in it is justifiably being questioned.
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Beware Dollar Weakness
June 5, 2002 2002 Ron Paul 52:10
Trust in paper is difficult to measure and anticipate, but long-term value in gold is dependable and more reliably assessed. Printing money and creating artificial credit may temporarily lower interest rates, but it also causes the distortions of malinvestment, overcapacity, excessive debt and speculation. These conditions cause instability, and market forces eventually overrule the intentions of the central bankers. That is when the apparent benefits of the easy money disappear, such as we dramatically have seen with the crash of the dot-coms and the Enrons and many other stocks.
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Has Capitalism Failed?
July 9, 2002 2002 Ron Paul 66:10
Capitalism should not be condemned, since we haven’t had capitalism. A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank. It’s not capitalism when the system is plagued with incomprehensible rules regarding mergers, acquisitions, and stock sales, along with wage controls, price controls, protectionism, corporate subsidies, international management of trade, complex and punishing corporate taxes, privileged government contracts to the military- industrial complex, and a foreign policy controlled by corporate interests and overseas investments. Add to this centralized federal mismanagement of farming, education, medicine, insurance, banking and welfare. This is not capitalism!
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Has Capitalism Failed?
July 9, 2002 2002 Ron Paul 66:15
But now we know that’s just not so. Speculative bubbles and all that we’ve been witnessing are a consequence of huge amounts of easy credit, created out of thin air by the Federal Reserve. We’ve had essentially no savings, which is one of the most significant driving forces in capitalism. The illusion created by low interest rates perpetuates the bubble and all the bad stuff that goes along with it. And that’s not a fault of capitalism. We are dealing with a system of inflationism and interventionism that always produces a bubble economy that must end badly.
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Has Capitalism Failed?
July 9, 2002 2002 Ron Paul 66:17
This is a bad scenario that need not happen. But preserving our system is impossible if the critics are allowed to blame capitalism and sound monetary policy is rejected. More spending, more debt, more easy credit, more distortion of interest rates, more regulations on everything, and more foreign meddling will soon force us into the very uncomfortable position of deciding the fate of our entire political system.
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25 July 2002
Monetary Practices 2002 Ron Paul 78:6
Yet, proponents of the Austrian theory have themselves embraced this apt metaphor. And if investment is the intoxicant, then the interest rate is the minimum drinking age. Set the interest rate too low, and there is bound to be trouble ahead.
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25 July 2002
Monetary Practices 2002 Ron Paul 78:7
The metaphorical drinking age is set by — and periodically changed by — the Federal Reserve. In our Fed-centric mixed economy, the understanding that “the Fed sets interest rates” has become widely accepted as a simple institutional fact. But unlike an actual drinking age, which has an inherent degree of arbitrariness about it, the interest rate cannot simply be “set” by some extramarket authority. With market forces in play, it has a life of its own.
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25 July 2002
Monetary Practices 2002 Ron Paul 78:8
The interest rate is a price. It’s the price that brings into balance our eagerness to consume now and our willingness to save and invest for the future. The more we save, the lower the market rate. Our increased saving makes more investment possible; the lower rate makes investments more future oriented. In this way, the market balances current consumption and economic growth.
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25 July 2002
Monetary Practices 2002 Ron Paul 78:10
But the Fed can do more than simply impose a ceiling on credit markets. Setting the interest rate below where the market would have it is accomplished not by decree but by increasing the money supply, temporarily masking the discrepancy between supply and demand. This papering over of the credit shortage hides a problem that would otherwise be obvious, allowing it to fester beneath a binge of investment spending.
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25 July 2002
Monetary Practices 2002 Ron Paul 78:22
“We are not in the midst of a financial panic, and recovery isn’t simply a matter of restoring confidence. Indeed, excessive confidence [fostered by unduly low interest rates maintained by rapid monetary growth? — RG & GC] may be part of the problem. Instead of being the victims of self-fulfilling pessimism, we may be suffering from self-defeating optimism. The driving force behind the current slowdown is a plunge in business investment. It now seems clear that over the last few years businesses spent too much on equipment and software and that they will be cautious about further spending until their excess capacity has been worked off. And the Fed cannot do much to change their minds, since equipment spending [at least when such spending has already proved to be excessive — RG & GC] is not particularly sensitive to interest rates.”
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Abolishing The Federal Reserve
10 September 2002 2002 Ron Paul 86:10
Why wasn’t it obvious? The Fed has been inflating the dollar as never before, driving interest rates down to absurdly low levels, even as the federal government has been pushing a mercantile trade policy, and New York City, the hub of the world economy, continues to be threatened by terrorism. The government is failing to prevent more successful attacks by not backing down from foreign policy disasters and by not allowing planes to arm themselves.
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Abolishing The Federal Reserve
10 September 2002 2002 Ron Paul 86:28
Is a gold standard feasible again? Of course. The dollar could be redefined in terms of gold. Interest rates would reflect the real supply and demand for credit. We could shut down the Fed and we would never need to worry again what the chairman of the Fed wanted. There was a time when Greenspan was nostalgic for such a system. Investors of the world have come to embrace this view even as Greenspan has completely abandoned it.
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Republic Versus Democracy
29 January 2003 2003 Ron Paul 6:73
The time will come when the Fed will no longer be able to dictate low interest rates. Reluctance of foreigners to lend, the exorbitant size of our borrowing needs, and the risk premium will eventually send interest rates upward. Price inflation will accelerate and the cost of living for all Americans will increase. Under these conditions, most Americans will face a decline in their standard of living.
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Republic Versus Democracy
29 January 2003 2003 Ron Paul 6:112
But there is also a problem with economic understanding. Economic ignorance about the shortcomings of central economic planning, excessive taxation and regulations, central bank manipulation of money, and credit and interest rates is pervasive in our Nation’s Capital. A large number of conservatives now forcefully argue that deficits do not matter. Spending programs never shrink no matter whether conservatives or liberals are in charge. Rhetoric favoring free trade is cancelled out by special interest protectionist measures. Support of international government agencies that manage trade such as the IMF, the World Bank, the WTO, and NAFTA politicizes international trade and eliminates any hope that free-trade capitalism will soon emerge.
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Don’t Antagonize our Trading Partners
April 1, 2003 2003 Ron Paul 41:7
The dollar has already significantly weakened this past year, and this trend will surely continue. A weaker dollar requires that we pay more for everything we buy overseas. Foreign borrowing will eventually become more difficult, and this will in time cause interest rates to rise. Be assured that domestic price inflation will accelerate. Economic law dictates that these events will cause the recession to linger and deepen.
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Legislation To Prohibit The Federal Government From Imposing A “Carry Tax”
17 July 2003 2003 Ron Paul 78:1
Mr. PAUL. Mr. Speaker, I rise to protect American liberty, privacy and economic wellbeing by introducing legislation to prohibit the Federal Government from imposing a “carry tax.” A carry tax is a tax imposed on Americans that requires them to pay a tax whenever they make a bank deposit. The amount of the tax is based on how long their money has been in circulation. Hard as it may be to believe, some in the Federal Government have actually considered imposing this tax on American citizens. Since this bill punishes those who rely on cash for the majority of their economic transactions, and since lower income Americans tend to rely on cash for their economic transactions, this is a highly regressive tax plan. Furthermore, since the plan is designed to lower interest rates, it will negatively impact those who rely on investment income for a significant part of their income. Thus, the carry tax will lower the income of millions of senior citizens.
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Abolishing The Federal Reserve
17 July 2003 2003 Ron Paul 83:10
[From USA Daily, May 6, 2003] THE GREATEST THEFT IN HISTORY (By Murray Sabrin) If you have a savings account, your bank probably credits it with interest every month. At the end of the month, you expect the bank to pay you the amount of interest it was obligated to pay you — no more no less. In other words, you would not expect the bank to change the interest it was going to pay you unless your account explicitly allows the bank to readjust the interest rate at its discretion.
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Abolishing The Federal Reserve
17 July 2003 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.
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Abolishing The Federal Reserve
17 July 2003 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 dollar’s 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%.
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Abolishing The Federal Reserve
17 July 2003 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.
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Abolishing The Federal Reserve
17 July 2003 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.
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Abolishing The Federal Reserve
17 July 2003 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.
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Abolishing The Federal Reserve
17 July 2003 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.
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Abolishing The Federal Reserve
17 July 2003 2003 Ron Paul 83:21
The bottom line: While the economic debate in Washington DC centers around President Bush’s 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.
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Abolishing The Federal Reserve
17 July 2003 2003 Ron Paul 83:22
The winners of the FED’s 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.
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Abolishing The Federal Reserve
17 July 2003 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.
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Legislation To Withdraw The United States From The Bretton Woods Agreement
17 July 2003 2003 Ron Paul 84:2
Just last year, Argentina was rocked by an economic crisis caused by IMF policies. Despite clear signs over the past several years that the Argentine economy was in serious trouble, the IMF continued pouring taxpayersubsidized loans with an incredibly low interest rate of 2.6 percent into the country. In 2001, as Argentina’s fiscal position steadily deteriorated, the IMF funneled over 8 billion dollars to the Argentine government!
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:3
The Founders of this country, and a large majority of the American people up until the 1930s, disdained paper money, respected commodity money, and disapproved of a central bank’s monopoly control of money creation and interest rates. Ironically, it was the abuse of the gold standard, the Fed’s credit-creating habits of the 1920s, and its subsequent mischief in the 1930s, that not only gave us the Great Depression, but also prolonged it. Yet sound money was blamed for all the suffering. That’s why people hardly objected when Roosevelt and his statist friends confiscated gold and radically debased the currency, ushering in the age of worldwide fiat currencies with which the international economy struggles today.
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:5
But this human trait of seeking wealth and comfort with the least amount of effort is often abused. It leads some to believe that by certain monetary manipulations, wealth can be made more available to everyone. Those who believe in fiat money often believe wealth can be increased without a commensurate amount of hard work and innovation. They also come to believe that savings and market control of interest rates are not only unnecessary, but actually hinder a productive growing economy. Concern for liberty is replaced by the illusion that material benefits can be more easily obtained with fiat money than through hard work and ingenuity. The perceived benefits soon become of greater concern for society than the preservation of liberty. This does not mean proponents of fiat money embark on a crusade to promote tyranny, though that is what it leads to, but rather they hope they have found the philosopher’s stone and a modern alternative to the challenge of turning lead into gold.
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:12
Money is a moral, economic, and political issue. Since the monetary unit measures every economic transaction, from wages to prices, taxes, and interest rates, it is vitally important that its value is honestly established in the marketplace without bankers, government, politicians, or the Federal Reserve manipulating its value to serve special interests. Money As a Moral Issue
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:31
We do hear some talk about monetary policy and criticism directed toward the Federal Reserve, but it falls far short of what I’m talking about. Big-spending welfarists constantly complain about Fed policy, usually demanding lower interest rates even when rates are at historic lows. Big-government conservatives promoting grand worldwide military operations, while arguing that “deficits don’t matter” as long as marginal tax rates are lowered, also constantly criticize the Fed for high interest rates and lack of liquidity. Coming from both the left and the right, these demands would not occur if money could not be created out of thin air at will. Both sides are asking for the same thing from the Fed for different reasons. They want the printing presses to run faster and create more credit, so that the economy will be healed like magic- or so they believe.
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:42
Though generally accepted by most modern economists and politicians, there is little hesitancy in accepting the omnipotent wisdom of the Federal Reserve to know the “price” of money – the interest rate – and its proper supply. For decades, and especially during the 1990s – when Chairman Greenspan was held in such high esteem, and no one dared question his judgment or the wisdom of the system- this process was allowed to run unimpeded by political or market restraints. Just as we must eventually pay for our perpetual deficits, continuous manipulation of interest and credit will also extract a payment.
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:43
Artificially low interest rates deceive investors into believing that rates are low because savings are high and represent funds not spent on consumption. When the Fed creates bank deposits out of thin air making loans available at below-market rates, mal-investment and overcapacity results, setting the stage for the next recession or depression. The easy credit policy is welcomed by many: stock-market investors, home builders, home buyers, congressional spendthrifts, bankers, and many other consumers who enjoy borrowing at low rates and not worrying about repayment. However, perpetual good times cannot come from a printing press or easy credit created by a Federal Reserve computer. The piper will demand payment, and the downturn in the business cycle will see to it. The downturn is locked into place by the artificial boom that everyone enjoys, despite the dreams that we have ushered in a “new economic era.” Let there be no doubt: the business cycle, the stagflation, the recessions, the depressions, and the inflations are not a result of capitalism and sound money, but rather are a direct result of paper money and a central bank that is incapable of managing it.
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:44
Our current monetary system makes it tempting for all parties, individuals, corporations, and government to go into debt. It encourages consumption over investment and production. Incentives to save are diminished by the Fed’s making new credit available to everyone and keeping interest rates on saving so low that few find it advisable to save for a rainy day. This is made worse by taxing interest earned on savings. It plays havoc with those who do save and want to live off their interest. The artificial rates may be 4, 5, or even 6% below the market rate, and the savers- many who are elderly and on fixed incomes- suffer unfairly at the hands of Alan Greenspan, who believes that resorting to money creation will solve our problems and give us perpetual prosperity.
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:45
Lowering interest rates at times, especially early in the stages of monetary debasement, will produce the desired effects and stimulate another boom-bust cycle. But eventually the distortions and imbalances between consumption and production, and the excessive debt, prevent the monetary stimulus from doing very much to boost the economy. Just look at what’s been happening in Japan for the last 12 years. When conditions get bad enough the only recourse will be to have major monetary reform to restore confidence in the system.
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:55
Once this process starts, interest rates will rise. And in recent weeks, despite the frenetic effort of the Fed to keep interest rates low, they are actually rising instead. The official explanation is that this is due to an economic rebound with an increase in demand for loans. Yet a decrease in demand for our debt and reluctance to hold our dollars is a more likely cause. Only time will tell whether the economy rebounds to any significant degree, but one must be aware that rising interest rates and serious price inflation can also reflect a weak dollar and a weak economy. The stagflation of the 1970s baffled many conventional economists, but not the Austrian economists. Many other countries have in the past suffered from the extremes of inflation in an inflationary depression, and we are not immune from that happening here. Our monetary and fiscal policies are actually conducive to such a scenario.
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:63
Paper money encourages speculation, excessive debt, and misdirected investments. The market, however, always moves in the direction of eliminating bad investments, liquidating debt, and reducing speculative excesses. What we have seen, especially since the stock market peak of early 2000, is a knock-down, drag-out battle between the Fed’s effort to avoid a recession, limit the recession, and stimulate growth with its only tool, money creation, while the market demands the elimination of bad investments and excess debt. The Fed was also motivated to save the stock market from collapsing, which in some ways they have been able to do. The market, in contrast, will insist on liquidation of unsustainable debt, removal of investment mistakes made over several decades, and a dramatic revaluation of the stock market. In this go-around, the Fed has pulled out all the stops and is more determined than ever, yet the market is saying that new and healthy growth cannot occur until a major cleansing of the system occurs. Does anyone think that tariffs and interest rates of 1% will encourage the rebuilding of our steel and textile industries anytime soon? Obviously, something more is needed.
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:64
The world central bankers are concerned with the lack of response to low interest rates and they have joined in a concerted effort to rescue the world economy through a policy of protecting the dollar’s role in the world economy, denying that inflation exists, and justifying unlimited expansion of the dollar money supply. To maintain confidence in the dollar, gold prices must be held in check. In the 1960s our government didn’t want a vote of no confidence in the dollar, and for a couple of decades, the price of gold was artificially held at $35 per ounce. That, of course, did not last.
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:70
An interesting headline appeared in the New York Times on July 31, 2003, “Commodity Costs Soar, But Factories Don’t Bustle.” What is observed here is a sea change in attitude by investors shifting their investment funds and speculation into things of real value and out of financial areas, such as stocks and bonds. This shift shows that in spite of the most aggressive Fed policy in history in the past three years, the economy remains sluggish and interest rates are actually rising. What can the Fed do? If this trend continues, there’s little they can do. Not only do I believe this trend will continue, I believe it’s likely to accelerate. This policy plays havoc with our economy; reduces revenues, prompts increases in federal spending, increases in deficits and debt occur, and interest costs rise, compounding our budgetary woes.
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Paper Money and Tyranny
September 5, 2003 2003 Ron Paul 93:71
The set of circumstances we face today are unique and quite different from all the other recessions the Federal Reserve has had to deal with. Generally, interest rates are raised to slow the economy and dampen price inflation. At the bottom of the cycle interest rates are lowered to stimulate the economy. But this time around, the recession came in spite of huge and significant interest rate reductions by the Fed. This aggressive policy did not prevent the recession as was hoped; so far it has not produced the desired recovery. Now we’re at the bottom of the cycle and interest rates not only can’t be lowered, they are rising. This is a unique and dangerous combination of events. This set of circumstances can only occur with fiat money and indicates that further manipulation of the money supply and interest rates by the Fed will have little if any effect.
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A Wise Consistency
February 11, 2004 2004 Ron Paul 2:13
Paper Money, Inflation, and Economic Pain : Paper money and inflation have never provided long-term economic growth, nor have they enhanced freedom. Yet the world, led by the United States, lives with a financial system awash with fiat currencies and historic debt as a consequence. No matter how serious the problems that come from central-bank monetary inflations — the depressions and inflation, unemployment, social chaos, and war — the only answer has been to inflate even more. Except for the Austrian free-market economists, the consensus is that the Great Depression was prolonged and exacerbated by the lack of monetary inflation. This view is held by Alan Greenspan, and reflected in his January 2001 response to the stock market slump and a slower economy — namely a record monetary stimulus and historically low interest rates. The unwillingness to blame the slumps on the Federal Reserve’s previous errors, though the evidence is clear, guarantees that greater problems for the United States and the world economy lie ahead. Though there is adequate information to understand the real cause of the business cycle, the truth and proper policy are not palatable. Closing down the engine of inflation at any point does cause short-term problems that are politically unacceptable. But the alternative is worse, in the long term. It is not unlike a drug addict demanding and getting a fix in order to avoid the withdrawal symptoms. Not getting rid of the addiction is a deadly mistake. While resorting to continued monetary stimulus through credit creation delays the pain and suffering, it inevitably makes the problems much worse. Debt continues to build in all areas — personal, business, and government. Inflated stock prices are propped up, waiting for another collapse. Mal-investment and overcapacity fail to correct. Insolvency proliferates without liquidation. These same errors have been prolonging the correction in Japan for 14 years, with billions of dollars of non-performing loans still on the books. Failure to admit and recognize that fiat money, mismanaged by central banks, gives us most of our economic problems, along with a greater likelihood for war, means we never learn from our mistakes. Our consistent response is to inflate faster and borrow more, which each downturn requires, to keep the economy afloat. Talk about a foolish consistency! It’s time for our leaders to admit the error of their ways, consider the wise consistency of following the advice of our Founders, and reject paper money and central bank inflationary policies.
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The Lessons of 9/11
April 22, 2004 2004 Ron Paul 27:42
A “guns and butter” policy was flawed in the 60s, and gave us interest rates of 21% in the 70s with high inflation rates. The current “guns and butter” policy is even more intense, and our economic infrastructure is more fragile than it was back then. These facts dictate our inability to continue this policy both internationally and domestically. It is true, an unshakable resolve to stay the course in Iraq, or any other hot spot, can be pursued for years. But when a country is adding to its future indebtedness by over 700 billion dollars per year it can only be done with great economic harm to all our citizens.
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The Lessons of 9/11
April 22, 2004 2004 Ron Paul 27:43
Huge deficits, financed by borrowing and Federal Reserve monetization, are an unsustainable policy and always lead to higher price inflation, higher interest rates, a continued erosion of the dollar’s value, and a faltering economy. Economic law dictates that the standard of living then must go down for all Americans—except for the privileged few who have an inside track on government largess—if this policy of profligate spending continues. Ultimately, the American people, especially the younger generation, will have to decide whether to languish with current policy or reject the notion that perpetual warfare and continued growth in entitlements should be pursued indefinitely.
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The Same Old Failed Policies in Iraq
June 3, 2004 2004 Ron Paul 37:11
The invisible economic costs are enormous but generally ignored. A policy of militarism and constant war has huge dollar costs, which contribute to the huge deficits, higher interest rates, inflation, and economic dislocations. War cannot raise the standard of living for the average American. Participants in the military-industrial complex do benefit, however. Now the grand scheme of physically rebuilding Iraq using American corporations may well prove profitable to the select few with political connections.
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Government Spending – A Tax on the Middle Class
July 8, 2004 2004 Ron Paul 52:12
The Fed is solely responsible for inflation by creating money out of thin air. It does so either to monetize federal debt, or in the process of economic planning through interest rate manipulation. This Fed intervention in our economy, though rarely even acknowledged by Congress, is more destructive than Members can imagine.
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Government Spending – A Tax on the Middle Class
July 8, 2004 2004 Ron Paul 52:13
Not only is the Fed directly responsible for inflation and economic downturns, it causes artificially low interest rates that serve the interests of big borrowers, speculators, and banks. This unfairly steals income from frugal retirees who chose to save and place their funds in interest bearing instruments like CDs.
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Government Spending – A Tax on the Middle Class
July 8, 2004 2004 Ron Paul 52:14
The Fed’s great power over the money supply, interest rates, the business cycle, unemployment, and inflation is wielded with essentially no Congressional oversight or understanding. The process of inflating our currency to pay for government debt indeed imposes a tax without legislative authority.
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Government Spending – A Tax on the Middle Class
July 8, 2004 2004 Ron Paul 52:15
This is no small matter. In just the first 24 weeks of this year the M3 money supply increased 428 billion dollars, and 700 billion dollars in the past year. M3 currently is rising at a rate of 10.5%. In the last seven years the money supply has increased 80%, as M3 has soared 4.1 trillion dollars. This bizarre system of paper money worldwide has allowed serious international imbalances to develop. We owe just four Asian countries 1.5 trillion dollars as a consequence of a chronic and staggering current account deficit now exceeding 5% of our GDP. This current account deficit means Americans must borrow 1.6 billion dollars per day from overseas just to finance this deficit. This imbalance, which until now has permitted us to live beyond our means, eventually will give us higher consumer prices, a lower standard of living, higher interest rates, and renewed inflation.
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Raising the Debt Limit: A Disgrace
November 18, 2004 2004 Ron Paul 79:7
Increasing the national debt sends a signal to investors that the government is not serious about reining in spending. This increases the risks that investors will be reluctant to buy government debt instruments. The effects on the American economy could be devastating. The only reason why we have been able to endure such large deficits without skyrocketing interest rates is the willingness of foreign nations to buy the federal government’s debt instruments. However, the recent fall in the value of the dollar and rise in the price of gold indicate that investors may be unwilling to continue to prop up our debt-ridden economy. Furthermore, increasing the national debt will provide more incentive for foreign investors to stop buying federal debt instruments at the current interest rates. Mr. Speaker, what will happen to our already fragile economy if the Federal Reserve must raise interest rates to levels unseen since the seventies to persuade foreigners to buy government debt instruments?
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Where To From Here?
November 20, 2004 2004 Ron Paul 81:20
The value of the dollar is a much more important issue than most realize in Washington. Our current account deficit of 6% of GDP, and our total foreign indebtedness of over $3 trillion, pose a threat to our standard of living. Unfortunately, when the crisis hits our leaders will have little ability to stem the tide of price inflation and higher interest rates that will usher in a dangerous period of economic weakness. Our dependency on foreign borrowing to finance our spendthrift habits is not sustainable. We borrow $1.8 billion a day! The solution involves changing our policy with regards to foreign commitments, foreign wars, empire overseas, and the ever-growing entitlement system here at home. This change is highly unlikely without significant turmoil, and it certainly is not on the administration’s agenda for the next four years. That’s why the world is now betting against the dollar.
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America’s Foreign Policy Of Intervention
26 January 2005 2005 Ron Paul 6:60
What if we suddenly discover we are the aggressors and we are losing an unwinnable guerilla war? What if we discover too late that we cannot afford this war, and that our policies have led to a dollar collapse, rampant inflation, high interest rates, and a severe economic downturn?
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The Hidden Cost of War
June 14, 2005 2005 Ron Paul 58:30
Being the issuer of the world’s premier currency allows for a lot more abuse than a country would have otherwise. World businesses, governments, and central banks accept our dollars as if they are as good as gold. This is a remnant of a time when the dollar was as good as gold. That is no longer the case. The trust is still there, but it’s a misplaced trust. Since the dollar is simply a paper currency without real value, someday confidence will be lost and our goose will no longer be able to lay the golden egg. That’s when reality will set in and the real cost of our extravagance, both domestic and foreign, will be felt by all Americans. We will no longer be able to finance our war machine through willing foreigners, who now gladly take our newly printed dollars for their newly produced goods and then loan them back to us at below market interest rates to support our standard of living and our war effort.
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The Hidden Cost of War
June 14, 2005 2005 Ron Paul 58:31
The payment by American citizens will come as the dollar loses value, interest rates rise, and prices increase. The higher prices become the tax that a more honest government would have levied directly to pay for the war effort. An unpopular war especially needs this deception as a method of payment, hiding the true costs which are dispersed and delayed through this neat little monetary trick. The real tragedy is that this “inflation tax” is not evenly distributed among all the people, and more often than not is borne disproportionately by the poor and the middle class as a truly regressive tax in the worst sense. Politicians in Washington do not see inflation as an unfair seductive tax. Our monetary policy unfortunately is never challenged even by the proponents of low taxes who care so little about deficits, but eventually it all comes to an end because economic law overrides the politicians’ deceit.
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The Hidden Cost of War
June 14, 2005 2005 Ron Paul 58:34
Centuries ago the notion of money introduced the world to trade and the principle of division of labor, ushering in for the first time a level of economic existence above mere subsistence. Modern fiat money with electronic transactions has given an additional boost to that prosperity. But unlike sound commodity money, fiat money, with easy credit and artificially low interest rates, causes distortions and mal-investments that require corrections. The modernization of electronic global transfers, which with sound money would be beneficial, has allowed for greater distortion and debt to be accumulated-- setting the stage for a much more serious period of adjustment requiring an economic downturn, liquidation of debt, and reallocation of resources that must come from savings rather than a central bank printing press.
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Why We Fight
September 8, 2005 2005 Ron Paul 95:67
The time will come when our policies dealing with foreign affairs will change for the better. But that will be because we can no longer afford the extravagance of war. This will occur when the American people realize that war causes too much suffering here at home, and the benefits of peace again become attractive to us all. Part of this recognition will involve a big drop in the value of the dollar, higher interest rates, and rampant price inflation.
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The Coming Category 5 Financial Hurricane
September 15, 2005 2005 Ron Paul 98:3
Congress reacted to Katrina in the expected irresponsible manner. It immediately appropriated over $60 billion with little planning or debate. Taxes won’t be raised to pay the bill-- fortunately. There will be no offsets or spending reductions to pay the bill. Welfare and entitlement spending is sacrosanct. Spending for the war in Iraq and the military-industrial complex is sacrosanct. There is no guarantee that gracious foreign lenders will step forward, especially without raising interest rates. This means the Federal Reserve and Treasury will print the money needed to pay the bills. The sad truth is that monetary debasement hurts poor people the most-- the very people we saw on TV after Katrina. Inflating our currency hurts the poor and destroys the middle class, while transferring wealth to the ruling class. This occurs in spite of good intentions and misplaced compassion.
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The Coming Category 5 Financial Hurricane
September 15, 2005 2005 Ron Paul 98:11
My suggestion to my colleagues: Any new expenditures must have offsets greater in amount than the new programs. Foreign military and foreign aid expenditures must be the first target. The Federal Reserve must stop inflating the currency merely for the purpose of artificially lowering interest rates to perpetuate a financial bubble. This policy allows government and consumer debt to grow beyond sustainable levels, while undermining incentives to save. This in turn undermines capital investment while exaggerating consumption. If this policy doesn’t change, the dollar must fall and the current account deficit will play havoc until the house of cards collapses.
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Amendment No. 6 Offered By Mr. Paul — Part 1
26 October 2005 2005 Ron Paul 109:7
Of course, there are other things that contribute to the housing bubble, something that we cannot deal with today, but the fact that there is easy credit and low interest rates, interest rates below the market level, that is then directed into the housing market. This also contributes to the size and the scope of the borrowing capacity of the GSEs.
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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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Amendment No. 6 Offered By Mr. Paul — Part 2
26 October 2005 2005 Ron Paul 110:7
My argument is if we do not solve the problem of basic underlying inflation distortion of interest rates, allocation of funds through housing programs, as well as this line of credit, believe me, we are not going to solve this problem. Please vote to strike this line of credit to the Treasury.
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The End Of Dollar Hegemony
15 February 2006 2006 Ron Paul 3:27
During the 1970s, the dollar nearly collapsed as oil prices surged and gold skyrocketed to $800 an ounce. By 1979, interest rates of 21 percent were required to rescue the system. The pressure on the dollar in the 1970s, in spite of the benefits accrued to it, reflected reckless budget deficits and monetary inflation during the 1960s. The markets were not fooled by LBJ’s claim that we could afford both guns and butter.
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The End Of Dollar Hegemony
15 February 2006 2006 Ron Paul 3:34
Even with all the shortcomings of the fiat monetary system, dollar influence thrived. The results seemed beneficial, but gross distortions built into the system remained. And true to form, Washington politicians are only too anxious to solve the problems cropping up with window dressing while failing to understand and deal with the underlying flawed policy. Protectionism, fixing exchange rates, punitive tariffs, politically motivated sanctions, corporate subsidies, international trade management, price controls, interest rate and wage controls, super- nationalist sentiments, threat of force, and even war are resorted to, all to solve the problems artificially created by a deeply flawed monetary and economic system.
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The End Of Dollar Hegemony
15 February 2006 2006 Ron Paul 3:35
In the short run, the issuer of a fiat reserve currency can accrue great economic benefits. In the long run, it poses a threat to the country issuing the world currency. In this case, that is the United States. As long as foreign countries take our dollars in return for real goods, we come out ahead. This is a benefit many in Congress fail to recognize as they bash China for maintaining a positive trade balance with us. But this leads to a loss of manufacturing jobs to overseas markets as we become more dependent on others and less self-sufficient. Foreign countries accumulate our dollars due to their high savings rates and graciously lend them back to us at low interest rates to finance our excessive consumption and our wars.
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The End Of Dollar Hegemony
15 February 2006 2006 Ron Paul 3:38
Price inflation is raising its ugly head, and the NASDAQ bubble, generated by easy money, has burst. The housing bubble likewise created is deflating. Gold prices have doubled, and Federal spending is out of sight, with zero political will to rein it in. The trade deficit last year was over $728 billion. A $2 trillion war is raging, and plans are being laid to expand the war into Iran and possibly Syria. The only restraining force will be the world’s rejection of the dollar. It is bound to come and create conditions worse than 1979–1980, which required 21 percent interest rates to correct. But everything possible will be done to protect the dollar in the meantime. We have a shared interest with those who hold our dollars to keep the whole charade going.
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The End Of Dollar Hegemony
15 February 2006 2006 Ron Paul 3:97
But if the Federal Reserve did not pick up the slack and create huge amounts of new credit and money out of thin air, interest rates would rise and call a halt to the charade. The people who suffer from a depreciated dollar don’t understand why they suffer, while the people who benefit promote the corrupt system. The wealthy clean up on Wall Street and the unsophisticated buy in at the market tops. Wealth is transferred from one group to another, and it is all related to the system that allows politicians and the central banks to create money out of thin air. It is literally legalized counterfeiting.
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Iran, The Next Neocon Target
5 April 2006 2006 Ron Paul 21:52
Excessive spending to finance the war causes deficits to explode. There are never enough tax dollars available to pay the bills, and since there are not enough willing lenders and dollars available, the Federal Reserve must create new money out of thin air and new credit for buying Treasury bills to prevent interest rates from rising too rapidly. Rising rates would tip off everyone that there are not enough savings or taxes to finance the war.
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Iran, The Next Neocon Target
5 April 2006 2006 Ron Paul 21:58
Though many Americans are starting to feel the economic pain of paying for this war through inflation, the real pain has not yet arrived. We generally remain fat and happy with a system of money and borrowing that postpones the day of reckoning. Foreigners, in particular the Chinese and Japanese, gladly participate in the charade. We print the money and they take it, as do the OPEC Nations, and provide us with consumer goods and oil. Then they loan the money back to us at low interest rates, which we use to finance the war and our housing bubble and excessive consumption. This recycling and perpetual borrowing of inflated dollars allow us to avoid the pain of high taxes to pay for our war and welfare spending. It is fine until the music stops and the real costs are realized, with much higher interest rates and significant price inflation. That is when outrage will be heard and the people will realize we cannot afford the humanitarianism of the neo-conservatives.
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Gold And The U.S. Dollar
25 April 2006 2006 Ron Paul 23:9
The lack of earned interest on gold is not a problem once people realize the purchasing power of their currency is declining faster than the interest rates they might earn. The purchasing power of gold can rise even faster than increases in the cost of living.
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Gold And The U.S. Dollar
25 April 2006 2006 Ron Paul 23:23
The incentive for central bankers to create new money out of thin air is two-fold. One is to practice central planning through the manipulation of interest rates. The second is to monetize the escalated Federal debt politicians create and thrive on.
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Gold And The U.S. Dollar
25 April 2006 2006 Ron Paul 23:29
The fact that our money supply is rising significantly cannot be hidden from the markets. The response in time will drive the dollar down while driving interest rates and commodity prices up.
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Gold And The U.S. Dollar
25 April 2006 2006 Ron Paul 23:32
Denying us statistical information, manipulating interest rates, and artificially trying to keep gold prices in check won’t help in the long run. If the markets are fooled only on the short term, it only means the adjustments will be much more dramatic later on, and in the meantime other market imbalances develop.
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Gold And The U.S. Dollar
25 April 2006 2006 Ron Paul 23:53
Whether it is war or welfare payments, it always means higher taxes, inflation and debt. Whether it is the extraction of wealth from the productive economy, the distortion of the market by interest rate manipulation or spending for war and welfare, it can’t happen without infringing upon personal liberty.
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Gold And The U.S. Dollar
25 April 2006 2006 Ron Paul 23:65
Since keeping interest rates below market levels is synonymous with new money creation by the Fed, the resulting business cycle, higher cost of living and job losses all can be laid at the doorstep of the Fed. This burden hits the poor the most, making Fed taxation by inflation the worst of all regressive taxes. Statistics about revenues generated by the income tax are grossly misleading. In reality, much harm is done by our welfare-warfare system supposedly designed to help the poor and tax the rich. Only sound money can rectify the blatant injustice of this destructive system.
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Gold And The U.S. Dollar
25 April 2006 2006 Ron Paul 23:75
Interest rate manipulation by central banks helps the rich, the banks, the government, and the politicians.
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Gold And The U.S. Dollar
25 April 2006 2006 Ron Paul 23:85
These were momentous monetary events, and every knowledgeable person worldwide paid close attention. Major changes were endured in 1979 and 1980 to save the dollar from disintegration. This involved a severe recession, interest rates over 21 percent, and general price inflation of 15 percent.
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What To Do About Soaring Oil Prices
2 May 2006 2006 Ron Paul 32:7
Third, we must remember that prices of all things go up because of inflation. Inflation, by definition, is an increase in the money supply. The money supply is controlled by the Federal Reserve and responds to the deficits Congress creates. When deficits are excessive, as they are today, the Fed creates new dollars out of thin air to buy Treasury bills and keeps interest rates artificially low. But when new money is created out of nothing, the money already in circulation loses value.
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Why Are Americans So Angry?
June 29, 2006 2006 Ron Paul 52:76
The military-industrial complex we were warned about has been transformed into a military-media-industrial-government complex that is capable of silencing the dissenters and cheerleading for war. It’s only after years of failure that people are able to overcome the propaganda for war and pressure their representatives in Congress to stop the needless killing. Many times the economic costs of war stir people to demand an end. This time around the war might be brought to a halt by our actual inability to pay the bills due to a dollar crisis. A dollar crisis will make borrowing 2.5 billion dollars per day from foreign powers like China and Japan virtually impossible, at least at affordable interest rates.
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Whom to Blame
19 July 2006 2006 Ron Paul 66:26
So even if you totally disagree with our aggressive empire building and policing the world, let me tell you, I am going to win the argument, because we are running out of money. We are in big debt, and we are borrowing it. We borrowed $3 billion a day from countries like China and Japan and Saudi Arabia to finance this horrendous debt. And it won’t be, it can’t be continued. The dollar will eventually weaken. You are going to have horrendous inflation. Interest rates are going to go up, and it is going to be worse than the stagflation of the 1970s.
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Big-Government Solutions Don’t Work
7 september 2006 2006 Ron Paul 74:89
But economic law eventually will prevail. Runaway military and entitlement spending cannot be sustained. We can tax the private economy only so much, and borrowing from foreigners is limited by the total foreign debt and our current account deficit. It will be difficult to continue this spending spree without significantly higher interest rates and further devaluation of the dollar. This all spells more trouble for our economy and certainly higher inflation. Our industry base is shattered, and our borders remain open to those who exploit our reeling entitlement system.
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College Student Relief Act Of 2007
17 January 2007 2007 Ron Paul 19:1
Mr. PAUL. Madam Speaker, anyone who knows a recent college graduate is well aware of the way many young people struggle to pay their student loans. By slightly reducing the interest rate on student loans, H.R. 5, while far from perfect, will help ease this burden. A commendable feature of this bill is that, instead of placing new burdens on taxpayers, it pays for the reduction in interest rates by reducing subsidies to financial institutions. Thus, the bill does not increase the deficit, taxes, or the size or scope of government.
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Statement for Hearing before the House Financial Services Committee, “Monetary Policy and the State of the Economy”
15 February 2007 2007 Ron Paul 32:7
Even if prices were held in check, in spite of our monetary inflation, concentrating on CPI distracts from the real issue. We must address the important consequences of Fed manipulation of interest rates. When interests rates are artificially low, below market rates, insidious mal-investment and excessive indebtedness inevitably bring about the economic downturn that everyone dreads.
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Statement for Hearing before the House Financial Services Committee, “Monetary Policy and the State of the Economy”
15 February 2007 2007 Ron Paul 32:16
Explain how interest rates are set. Conservatives profess to support free markets, without wage and price controls. Yet the most important price of all, the price of money as determined by interest rates, is set arbitrarily in secret by the Fed rather than by markets! Why is this policy written in stone? Why is there no congressional input at least?
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Opening Statement Committee on Financial Services Paulson Hearing
20 June 2007 2007 Ron Paul 71:5
The recent sharp rise in interest rates may well be signaling the end to the painless easy money decade that has allowed us to finance our extravagant welfare/warfare spending with minimal productive effort and no savings. Monetary inflation and foreign borrowing have allowed us to live far beyond our means – a type of monetary arrangement that always comes to a painful end.
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Opening Statement Committee on Financial Services Paulson Hearing
20 June 2007 2007 Ron Paul 71:13
Welfare and warfare – guns and butter philosophy always leads to harmful inflation. We had severe problems in the 60’s and 70’s and we are doing the same thing once again. We have only started to pay for the extravagance of financing the current war and rapidly expanding the entitlement system by foreign borrowing and creating money and credit out of thin air. There are reasons to believe that the conditions we have created will be much worse than they were in 1979 when interest rates of 21% were required to settle the markets and reverse the stagflation process.
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Statement before the Financial Services Committee
20 September 2007 2007 Ron Paul 93:2
As with asset bubbles and investment manias in past history, the fuel for the current housing bubble had its origins in monetary manipulation. The housing boom was caused by the Federal Reserve's policy resulting in artificially low interest rates. Consumers, misled by low interest rates, were looking to consume, while homebuilders saw the low interest rates as a signal to build, and build they did.
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Statement before the Financial Services Committee
20 September 2007 2007 Ron Paul 93:3
One of the primary means the Federal Reserve uses to stimulate the economy is manipulation of the federal funds rate and the discount rates, which are used as benchmark rates throughout the economy. The interest rate is the price of time, as the value of a dollar today and the value of a dollar one year from now are not the same. Just like any price in the market, interest rates have an important informational signaling purpose. Government price fixing of the interest rate has the same deleterious effects as price controls in other areas.
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Statement before the Financial Services Committee
20 September 2007 2007 Ron Paul 93:4
Reduction in the interest rate has two major effects: it encourages consumption over saving; and it makes long-term, capital-intensive projects cheaper to undertake. Under Chairman Greenspan's tenure, the federal funds rate was so low that the real interest rate (that is the nominal interest rate minus inflation) was negative. With a negative real interest rate, someone who saves money will literally lose the value of that money.
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Statement before the Financial Services Committee
20 September 2007 2007 Ron Paul 93:6
Millions of Americans now find themselves stuck in a financial quandary that is not their fault. The result of manipulation of the interest rate, money supply, and mortgage markets are the recently popped housing bubble.
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Statement Before the Joint Economic Committee
8 November 2007 2007 Ron Paul 103:6
Finally, the Federal Reserve's loose monetary policy and lowering of interest rates were a major spur to the housing boom. Low interest rates influence marginal buyers, those who are sitting on the fence, and encourage them to take on a mortgage that they otherwise would not. Even when interest rates are raised, no one expects them to stay high for long, as there is always pressure from politicians and investors to keep rates low, as no one wants the cheap credit to end.
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Statement Before the Joint Economic Committee
8 November 2007 2007 Ron Paul 103:7
Thinking that interest rates will cycle from low to higher, back to low, lenders begin to offer adjustable rate mortgages, 2/28's, 3/27's, and other sophisticated mortgages that may trap many unsavvy buyers. Buyers go short, lenders go long, and many people have been burned as a result.
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“Monetary Policy and the State of the Economy”
February 26, 2008 2008 Ron Paul 8:2
Price controls are almost universally reviled by economists. The negative economic consequences of price floors or price ceilings are numerous and well-documented. Our current series of hearings have been called to discuss the most important, but least understood, price manipulation in the world today: the manipulation of the interest rate.
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“Monetary Policy and the State of the Economy”
February 26, 2008 2008 Ron Paul 8:3
By setting the federal funds rate, the rate at which banks in the Federal Reserve System loan funds to each other, the Federal Reserve inhibits the actions of market participants coming together to determine a market interest rate. The Federal Reserve and the federal government do not deign to interfere in setting the price of houses, the interest rate on mortgages, or the prices of wood and steel. The Fed’s actions in setting the federal funds rate however, because it reflects the price of money to a borrower and thus affects demand for money, affects prices throughout the economy in a manner less pervasive but just as damaging as direct price controls.
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“Monetary Policy and the State of the Economy”
February 26, 2008 2008 Ron Paul 8:5
The setting of the interest rate strikes me as quite similar to the way FDR used to set gold prices in the 1930’s, at his whim, resulting in economic havoc and uncertainty. When market actors have to devote much of their time to discerning the mindset of government price-setters, to parsing FOMC statements and minutes, they are necessarily diverted from productive economic activity. They cease to become purely economic actors and are forced to become political forecasters. This is not a problem isolated to this particular case, as businesses are forced to reckon with tax increases, expiring tax credits, import tariffs, subsidies to competitors, etc. However, because the interest rate determines the cost of borrowing and therefore determines whether or not marginal long-term business investments are undertaken, this politicized interest rate manipulation has far more impact than other government policies.
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“Monetary Policy and the State of the Economy”
February 26, 2008 2008 Ron Paul 8:6
This setting of the interest rate introduces the business cycle into the economy. Until we understand the results these Federal Reserve actions have, we will be doomed to repeat these periods of boom and bust. I urge my colleagues to study this matter, and to resist the urge for greater Federal Reserve intervention in the market.
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“Monetary Policy and the State of the Economy”
February 27, 2008 2008 Ron Paul 9:5
What all of these proposed bailouts fail to mention is the moral hazard to which bailouts lead. If the federal government bails out banks, investors, or homeowners, the lessons of sound investment and fiscal discipline will not take hold. We can see this in the financial markets in the boom and bust of the business cycle. The Fed’s manipulation of interest rates results in malinvestment which, when it is discovered, leads to economic contraction and liquidation of malinvested resources. But the Fed never allows a complete shakeout, so that before a return to a sound market can occur, the Fed has already bailed out numerous market participants by undertaking another bout of loose money before the effects of the last business cycle have worked their way through the economy.
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“The Future of Financial Services: Exploring Solutions for the Market Crisis”
September 24, 2008 2008 Ron Paul 59:1
Mr. Chairman, It is truly a shame that, less than two decades after the fall of communism, the lessons of price control are completely lost on most Washington power-brokers. The Treasury proposal before Congress is nothing more than a form of price control, an attempt to keep asset prices artificially elevated. The root of our recent economic boom, as in any other business cycle, was government intervention into the market under the guise of lowering the interest rate, which is itself a price. The function that prices play in the market in equalizing supply and demand, and the distortions that necessarily accompany each government effort at price-fixing, are forgotten by too many in Washington.
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Statement on HR 1424
October 3, 2008 2008 Ron Paul 67:4
With deposit insurance increasing to $250,000 and banks able to set their reserves to zero, we will undoubtedly see future increases in unsound lending. No one in our society seems to understand that wealth is not created by government fiat, is not created by banks, and is not created through the manipulation of interest rates and provision of easy credit. A debt-based society cannot prosper and is doomed to fail, as debts must either be defaulted on or repaid, neither resolution of which presents this country with a pleasant view of the future. True wealth can only come about through savings, the deferral of present consumption in order to provide for a higher level of future consumption. Instead, our government through its own behavior and through its policies encourages us to live beyond our means, reducing existing capital and mortgaging our future to pay for present consumption.
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UNTITLED
3 October 2008 2008 Ron Paul 68:3
We want to do this it is said to prevent the recession or depression because that is unbearable. But the truth is you should have thought about that 10 or 15 years ago because the financial bubble created by the excess of credit and the lowering of the interest rate is the cause of the recession. The recession is a demand. It is a must; you can’t avoid it. Yes, it has been papered over several times over the last several decades, but that just made the bubble bigger.
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The Austrians Are Right
November 20, 2008 2008 Ron Paul 71:4
At least 90% of the cause for the financial crisis can be laid at the doorstep of the Federal Reserve. It is the manipulation of credit, the money supply, and interest rates that caused the various bubbles to form. Congress added fuel to the fire by various programs and institutions like the Community Reinvestment Act, Fannie Mae and Freddie Mac, FDIC, and HUD mandates, which were all backed up by aggressive court rulings.
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Bailout
January 14, 2009 2009 Ron Paul 8:5
I do want to address the subject more specifically about moral hazard and why the system was so deeply flawed. That is, when a Federal Reserve system and a central bank create easy money and easy credit and they have interest rates lower than they should be, businesspeople do the wrong things. They make mistakes. It’s called malinvestments, and we’ve been doing it for a long time. It causes financial bubbles, and they have to be corrected.
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Bailout
January 14, 2009 2009 Ron Paul 8:6
Actually, the recession is therapy for all of the mistakes, but the mistakes come, basically, from a Federal Reserve system that’s causing too many people to make mistakes. It causes savers to make mistakes. Interest rates are lower than they should be, so they don’t save. In capitalism, capital comes from savings, but for decades now, capital has come from the printing press, and nobody has saved.
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FEDERAL RESERVE IS THE CULPRIT
February 25, 2009 2009 Ron Paul 17:1
Mr. PAUL. Mr. Speaker, the Federal Reserve is the culprit; it has delivered this crisis to us. The Federal Reserve’s low interest rate policy is a big mistake; it is not a panacea.
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FEDERAL RESERVE IS THE CULPRIT
February 25, 2009 2009 Ron Paul 17:2
Artificially low interest rates are achieved by inflating the money supply. Low interest rates penalize the thrifty, and those who save are cheated. It promotes consumption and borrowing over savings and investing. Manipulating interest rates is an immoral act, it is economically destructive. The policy of artificially low interest rates caused our problems and, therefore, cannot be the solution.
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FEDERAL RESERVE IS THE CULPRIT
February 25, 2009 2009 Ron Paul 17:3
The market rate of interest is crucial information for the smooth operation of the economy. A central bank setting interest rates is price fixing and is a form of central economic planning. Price fixing is a tool of socialists and destroys production.
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FEDERAL RESERVE IS THE CULPRIT
February 25, 2009 2009 Ron Paul 17:4
Central bankers, politicians and bureaucrats can’t know what the proper rate should be. They lack the knowledge and are deceived by their aggrandizement. Manipulating the money supply and interest rates rejects all the principles of the free market.
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MISTAKES: JUST A FEW!
June 3, 2009 2009 Ron Paul 63:5
This has entailed taxpayers being forced to buy worthless assets, propping up malinvestments, not allowing the liquidation of bad debt, bailing out privileged banking, Wall Street and corporate elites. We promote artificially low interest rates which eliminates information that only the market can provide. Steadily sacrificing economic and personal liberty is accepted as good policy. Socializing American industry offers little hope that prosperity will soon return.
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THE BIG GUNS HAVE LINED UP AGAINST H.R. 1207
July 30, 2009 2009 Ron Paul 88:2
Federal Reserve Chairman Ben Bernanke argues that H.R. 1207, the legislation to audit the Federal Reserve, would politicize monetary policy. He claims that monetary policy must remain “independent,” that is, secret. He ignores history, because chairmen of the Federal Reserve in the past, especially when up for reappointment, do their best to accommodate the President with politically driven low interest rates and a bubble economy.
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THE BIG GUNS HAVE LINED UP AGAINST H.R. 1207
July 30, 2009 2009 Ron Paul 88:6
They also argue that an audit would hurt the value of the U.S. dollar. In fact, the Fed, in less than 100 years of its existence, has reduced the value of the 1914 dollar by 96 percent. They claim H.R. 1207 would raise interest rates. How could it? The Fed sets interest rates and the bill doesn’t interfere with monetary policy. Congress would have no say in the matter; and besides, Congress likes low interest rates. It is argued that the Fed wouldn’t be free to raise interest rates if they thought it necessary. But Bernanke has already assured the Congress that rates are going to stay low for the foreseeable future, and, again, this bill does nothing to allow Congress to interfere with interest rate setting.
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TRANSPARENCY AT THE FEDERAL RESERVE
December 1, 2009 2009 Ron Paul 100:3
Since the Fed is the source of all economic downturns, it’s impossible for any central banker to regulate in such a manner to prevent the problems that are predictable consequences of his own monetary management. The Federal Reserve fixes interest rates at levels inevitably lower than those demanded by the market. This manipulation is a form of price control through credit expansion, and is the ultimate cause of business cycles and so many of our economic problems, generating the mal- investment, excessive debt, stock, bond, commodity, and housing bubbles.
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TRANSPARENCY AT THE FEDERAL RESERVE
December 1, 2009 2009 Ron Paul 100:7
What he does not recognize – nor does he want to admit – is that he is talking about symptoms while ignoring the source of the crisis: the Federal Reserve itself. More regulations will never compensate for all the distortion and excesses caused by monetary inflation and artificially low interest rates. Regulation distracts from the real cause while further interfering with the market forces, thus guaranteeing that the recession will become much deeper and prolonged.
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Deceptive economic euphoria
17 August 1998 Texas Straight Talk 17 August 1998 verse 10 ... Cached
First, we're not doing as well as claimed and most Americans know it. Second, we're doing well because we benefit, as all countries do for a limited periods of time, from central bank credit creation - i.e., free money flowing into the banking system keeping interest rates artificially low. A $5.6 trillion debt and growing allows government expenditures to continue despite the nonsense about a balanced budget all the Washington pundits are bragging about.
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The problem is the currency
21 September 1998 Texas Straight Talk 21 September 1998 verse 4 ... Cached
Although taxes, spending, regulatory policies, and special interest cronyism compounds the problems, all nations of the world operate with a fiat monetary system and it has allowed the financial bubble to develop. Easy credit and artificially low interest rates starts a chain reaction that by its very nature guarantees a future correction. The later bad consequences of inflating a currency are certain, no matter how beneficial the earlier ones may seem.
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The problem is the currency
21 September 1998 Texas Straight Talk 21 September 1998 verse 12 ... Cached
Let there be no doubt about it. The good times came with generous credit creation and low interest rates and the Fed will yield to the politicians' pressure to continue the process. Turning off the money spigot, and allowing the market to work will never be seriously considered.
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Economic crisis looms
19 October 1998 Texas Straight Talk 19 October 1998 verse 9 ... Cached
That is what we are witnessing today. The world-wide fragile financial system is now collapsing, and tragically the only cry is for more credit inflation because the cause of our dilemma is not understood. An attempt at credit stimulation with interest rates below one percent, is doing nothing for Japan’s economy and for a good reason: It is the wrong treatment for the wrong diagnosis.
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Economic crisis looms
19 October 1998 Texas Straight Talk 19 October 1998 verse 14 ... Cached
First, the Federal Reserve should be denied the power to fix interest rates and buy government debt. It should not be a central economic planner through manipulation of money and credit.
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Campaign reform misses target
12 July 1999 Texas Straight Talk 12 July 1999 verse 6 ... Cached
There is a tremendous incentive for every special interest group to influence government. Every individual, bank or corporation that does business with government invests plenty in influencing government. Corporate lobbyists spend over $100 million per month trying to influence Congress, while taxpayers' dollars are used by bureaucrats in efforts to convince Congress to protect their "empires." Government has tremendous influence over the economy and financial markets through interest rate controls, contracts, regulations, loans and grants. Corporations and individuals alike are forced to participate in an out-of-control system essentially as a matter of self-defense.
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Greenspan Nominated to a Fourth Term
17 January 2000 Texas Straight Talk 17 January 2000 verse 6 ... Cached
But one thing ignored is the fact that a fiat monetary system is incompatible with a free market economy. Instead of depending on production and savings for capital, today's economy depends on new "capital" coming from the Fed's credit machine. When credit is created out of thin air for investment purposes and interest rates are driven artificially low, mal-investment results. This monetary inflation, of which we have had plenty, has already set the stage for the next recession.
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Greenspan Nominated to a Fourth Term
17 January 2000 Texas Straight Talk 17 January 2000 verse 8 ... Cached
Greenspan has already supervised one serious recession in the early 1990s. No matter how astute a chairman of the Federal Reserve Board is, it's impossible to avoid recessions when managing a fiat monetary system. Alan Greenspan has been quite generous when it comes to creating new money. Since 1987 when Greenspan took over, high-powered money, as measured by the monetary base, has increased by 138%. This has resulted in an increase of nearly $3 trillion of bank deposits as measured by M3. This new money creation keeps interest rates lower than they otherwise would be, making the banks and Wall Street happy. It also pleases the spendthrift politicians who during Greenspan's term have increased the national debt by $32 trillion. Almost the entire increase in the national debt since 1987 has been monetized or paid for by Greenspan printing new money.
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Greenspan Nominated to a Fourth Term
17 January 2000 Texas Straight Talk 17 January 2000 verse 9 ... Cached
Of course, any of us would "thrive" if we could increase our wealth at that rate with borrowing and counterfeiting - but for us it's illegal. For now, foreigners' willingness to soak up our inflated dollars, while selling us goods at discount, makes us feel wealthier. But that will eventually end with higher interest rates, a weak dollar and CPI type price inflation. When this takes place, any increase in Federal Reserve credit will only accelerate the painful correction.
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Greenspan Nominated to a Fourth Term
17 January 2000 Texas Straight Talk 17 January 2000 verse 16 ... Cached
This is not to say that anyone else can do any better than the current chairman in the coming years. Central planning, whether it's in the monetary system or in the economy itself, just doesn't work. The debate should not be over who is best at managing the economy, determining the money supply and knowing the proper interest rates. It should be over whether or not we should have a monetary system that requires its manager to know things he cannot know. Instead of arguing over whether and when interest rates should go up or down, we should debate whether or not market interest rates and commodity money is superior to fiat money in preventing price inflation, recessions and painful periods of unemployment.
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Economic Woes and the Federal Reserve
19 March 2001 Texas Straight Talk 19 March 2001 verse 6 ... Cached
Such thinking should be dismissed as absurd. Economic recessions are not the result of a gloomy national state of mind; if so, we could create economic prosperity simply by positive thinking. Yet basic education in economics is so badly lacking in America that many will accept this preposterous idea. The same ignorance of economic principles is behind the fallacy that capitalism is to blame for recessions, that a free market system causes an inevitable cycle of booms and busts. In reality, it is government intervention in the economy, particularly in the areas of money supply and interest rates, which creates the precarious financial bubbles that cause economic recessions.
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Economic Woes and the Federal Reserve
19 March 2001 Texas Straight Talk 19 March 2001 verse 7 ... Cached
The Federal Reserve did two things to artificially expand the economy over the last decade. First, it relentlessly lowered interest rates whenever growth slowed. Interest rates should be set by the free market, with the availability of capital (i.e. savings) determining the cost of borrowing money. In a healthy market economy, more saving equals lower interest rates. When savings rates are low, capital dries up and the cost of borrowing increases. When interest rates are set by the market, individuals and businesses make good spending decisions, because they pay an accurate interest rate for their debts. However, when the Fed set rates artificially low, the cost of borrowing becomes cheap. Individuals incur greater amounts of debt (evidenced by the record number of personal bankruptcies), while businesses overextend themselves and grow without real gains in productivity. The bubble bursts quickly once the credit dries up and the bills cannot be paid.
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The Fed Cannot Create Prosperity
03 September 2001 Texas Straight Talk 03 September 2001 verse 4 ... Cached
All of these economic problems have developed despite the massive interest rate- cutting measure taken by the Fed over the past two years. Chairman Greenspan has cut interest rates 7 times in 2001 alone, most recently in mid-August. However, the markets have not responded, and Wall Street continues to pressure the Fed to reduce rates even more. This trend developed steadily throughout the 1990's- each time the economy showed signs of a downturn, the Fed cut rates. Yet it is becoming apparent that this practice cannot work forever, and that every short-term fix simply puts off the inevitable painful correction that must follow.
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The Fed Cannot Create Prosperity
03 September 2001 Texas Straight Talk 03 September 2001 verse 5 ... Cached
The Japanese economy provides a vivid example of the futility of manipulating interest rates. Japan's central bank began cutting rates more than a decade ago, but the country remains mired in a stagnant economy. Ultimately, interest rates were cut to zero, where they have remained for several years. This rate-cutting has failed to stimulate the economy, however. The Nikkei stock market index remains at 1980s levels, while Japanese unemployment recently reached 5%, the highest rate in decades. The Japanese experience should tell us that prosperity cannot be created out of thin air by a central bank.
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The Fed Cannot Create Prosperity
03 September 2001 Texas Straight Talk 03 September 2001 verse 6 ... Cached
Still, while some in America have begun to challenge the wisdom of Alan Greenspan, few seem to question the concept of the Fed bank itself. In fact, the financial and political press never discuss the dangers of a fiat currency system managed by a centralized bank. Remember, every time the Fed cuts interest rates, it expands the amount of money in the economy. Economists have a simple word for this increase in the money supply: inflation. Inflation means your money has less buying power and your retirement savings are worth less. Yet we never hear the Fed criticized for its inflationary measures- on the contrary, Greenspan was widely praised throughout the 1990s as the all-knowing sage responsible for the good times.
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The Fed Cannot Create Prosperity
03 September 2001 Texas Straight Talk 03 September 2001 verse 8 ... Cached
In a truly free society, interest rates should be set by the market. The laws of supply and demand work better than any government bureaucrat in determining the correct cost of money, and without the political favoritism and secrecy that characterize central banks. Americans should not tolerate the manipulation of our economy and the inflation of our currency by an unaccountable institution. The turbulent period we are entering may serve to remind Americans that the Fed cannot suspend the laws of economics. The key to lasting prosperity is a return to true private banking, where interest rates are set by the free market and dollars are backed by gold.
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Enron, Bankruptcy, and Easy Credit
17 December 2001 Texas Straight Talk 17 December 2001 verse 8 ... Cached
The Fed consistently increased the money supply (by printing dollars) throughout the 1990s, while simultaneously lowering interest rates. When dollars are plentiful, and interest rates are artificially low, the cost of borrowing becomes cheap. This is why so many Americans are more deeply in debt than ever before. This easy credit environment made it possible for Enron to secure hundreds of millions in uncollateralized loans, loans that now cannot be repaid. The cost of borrowing money, like the cost of everything else, should be established by the free market- not by government edict. Unfortunately, however, the trend toward overvaluation will continue until the Fed stops creating money out of thin air and stops keeping interest rates artificially low. Until then, every investor should understand how Fed manipulations affect the true value of any company and the level for the markets.
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Argentine Default and the IMF
14 January 2002 Texas Straight Talk 14 January 2002 verse 3 ... Cached
Imagine a hypothetical bank run by a group of international executives operating behind closed doors, making decisions of enormous international importance. Imagine the bank consistently made high-risk loans to shaky governments with weak economies and currencies. Imagine it made those loans at substantially below-market interest rates, even though the risks involved warranted high interest rates. Imagine it knew that certain corporate interests would benefit directly from contracts awarded by the borrowing nations. Finally, imagine the bank schemed with governments around the world to have taxpayers foot the bill for the predictable losses stemming from bad loans. Surely no reasonable person would invest his money in such an institution, right?
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Argentine Default and the IMF
14 January 2002 Texas Straight Talk 14 January 2002 verse 7 ... Cached
The recent financial collapse in Argentina provides a perfect example of the folly of IMF "assistance." Although the Argentine economy has been in serious trouble for several years, IMF loans with an incredibly low interest rate of 2.6% kept pouring into the country. According to Congressman Jim Saxton, Chairman of the Joint Economic Committee, this "continued lending over many years sustained and subsidized a bankrupt Argentine economic policy, whose collapse is now all the more serious. The IMF's generous subsidized bailouts lead to moral hazard problems, and enable shaky governments to pressure the IMF for even more funding or risk disaster." Yet unless Congress acts this year, U.S. taxpayers will be forced to pay for even more bad loans to equally unstable countries.
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Optimism or Pessimism for the Future of Liberty?
11 February 2002 Texas Straight Talk 11 February 2002 verse 7 ... Cached
The economic ramifications of our war on terrorism are also quite serious. Although the recession certainly cannot be blamed solely on the September 11th attacks, the huge increases in federal spending and the effects of all the new regulations cannot help the recovery. When one adds up the domestic costs, the military costs, and the costs of new regulations, it is certain that deficits will grow significantly. The Federal Reserve will remain under great pressure to continue its dangerous monetary inflation by printing dollars and expanding credit. This policy will result in higher rather than lower interest rates, a weak dollar, and rising prices. The danger of our economy spinning out of control cannot be dismissed.
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Predictions for an Unwritten Future
29 April 2002 Texas Straight Talk 29 April 2002 verse 18 ... Cached
An international dollar crisis will dramatically boost interest rates in the United States.
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Does Government Run the Economy?
19 August 2002 Texas Straight Talk 19 August 2002 verse 6 ... Cached
In a capitalist economy, the government acts only as a referee by protecting property rights, enforcing contracts, and prohibiting force and fraud. Because our modern federal government has strayed so far from its limited constitutional powers, it controls the economy far more than the founders intended. As a result, our economy is becoming more and more socialist. Federal taxes, regulations, welfare, subsidies, wage controls, and price controls, along with Fed manipulation of interest rates and the money supply, all represent socialist government intervention in the economy. No matter what the Democrats or Republicans want to call it, socialism is socialism. We should have the honesty to identify exactly what is being advocated when some call for even more government control of the economy.
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The 2003 Spending Orgy
03 March 2003 Texas Straight Talk 03 March 2003 verse 6 ... Cached
Meanwhile, Federal Reserve Chairman Greenspan recently suggested before a congressional committee that billions could be saved if the Treasury used lower inflation estimates. In other words, if we say inflation is lower than the Consumer Price Index and other barometers indicate, Congress won’t have to spend as much on cost-of-living adjustments for programs like Social Security. This amounts to lying to the American people about our monetary policies, by hiding the true rate of inflation caused by printing too many dollars and keeping interest rates artificially low.
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Declining Dollar, Declining Fortunes
23 June 2003 Texas Straight Talk 23 June 2003 verse 3 ... Cached
Of course capitalism is based on the premise that centralized economic planning is bad. I’m always amazed that otherwise pro-market conservatives, who rightfully scorned disastrous Soviet economic policies, are so willing to accept centralized monetary planning by the Fed. True capitalism requires a free market for money and interest rates, just as surely as it requires a free market for wages and prices.
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Declining Dollar, Declining Fortunes
23 June 2003 Texas Straight Talk 23 June 2003 verse 5 ... Cached
Mr. Greenspan’s two greatest sins are easy to understand. First, he has wildly inflated the money supply by creating more than $5 trillion in new dollars since he became Fed chairman. Second, he has relentlessly cut interest rates below market levels. These actions make money too plentiful and too cheap. When dollars are abundant and the cost of borrowing is low, people and businesses spend money less carefully. The stock market bubble of the late 1990s is all the proof we need that Fed printing presses can create money, but not wealth.
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Federal Reserve Inflation Punishes Saving
21 July 2003 Texas Straight Talk 21 July 2003 verse 2 ... Cached
During testimony before the House Financial Services committee last week, Federal Reserve Chairman Alan Greenspan indicated that he is prepared to maintain low interest rates for “as long as it takes” to energize the listless economy. Unfortunately, this will only prolong the painful economic consequences of his own easy money, easy credit policies.
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Federal Reserve Inflation Punishes Saving
21 July 2003 Texas Straight Talk 21 July 2003 verse 4 ... Cached
The real measure of inflation is the increase in the money supply. Chairman Greenspan, through his relentless cutting of interest rates, has made it possible for banks to flood the worldwide economy with dollars. In fact the money supply, as measured by a figure economists call M3, has nearly doubled since 1996.
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Federal Reserve Inflation Punishes Saving
21 July 2003 Texas Straight Talk 21 July 2003 verse 6 ... Cached
The Fed’s inflationary policies hurt older people the most. Older people generally rely on fixed incomes from pensions and Social Security, along with their savings. Inflation destroys the buying power of their fixed income and savings, while low interest rates reduce any income from savings. So while Fed policies encourage younger people to overborrow because interest rates are so low, they also punish thrifty older people who saved for retirement but find their dollars eroded by inflation.
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Federal Reserve Inflation Punishes Saving
21 July 2003 Texas Straight Talk 21 July 2003 verse 8 ... Cached
Yet even as the Chairman warned about the supposed danger of deflation, he also discussed his view that rising natural gas prices pose a serious threat to the U.S. economy. There seems to be no coherent message coming from Mr. Greenspan: we’re warned about “irrational exuberance” even as the Fed cuts interest rates and wildly inflates the money supply; we’re told there is no inflation, yet housing prices skyrocket; we’re told that only our central bank planners have the wisdom to determine proper monetary policies, yet the Chairman himself seems to equivocate constantly and provide only the fuzziest answers to straightforward questions.
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Federal Reserve Inflation Punishes Saving
21 July 2003 Texas Straight Talk 21 July 2003 verse 9 ... Cached
Centralized planning is as disastrous in monetary affairs as in economic affairs. Just as Russian commissars could not determine prices or production levels in the absence of a free market, the Federal Reserve Board cannot determine the “proper” level for interest rates or the money supply. Our fiat currency and artificially low interest rates can only result in the deterioration of the U.S. dollar through inflation, which in the end will cause interest rates to rise no matter what the Fed says or does. Older Americans especially stand to suffer most from Mr. Greenspan’s easy money policies.
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Economic Woes Begin at Home
03 November 2003 Texas Straight Talk 03 November 2003 verse 4 ... Cached
China exports many products into the United States, which makes her a convenient scapegoat for our economic problems. Demanding that China adjust its currency valuation is merely a distraction from addressing the real economic dilemmas facing our country, however. Congress should be focused on our own disastrous monetary policies. As long as the Fed can print money at will and set interest rates, the value of our dollars will be subject to the whims of politicians and the perceived economic needs of politically powerful special interests.
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The Disappearing Dollar
08 December 2003 Texas Straight Talk 08 December 2003 verse 7 ... Cached
Unlike Warren Buffett, most Americans are stuck with their U.S. dollars. Average people, particularly those who depend on savings or fixed incomes to fund their retirement years, cannot abide the continued devaluation of our currency. A true strong-dollar policy would require constriction of the money supply and higher interest rates, both of which would cause some short-term pain for the American economy. In the long run, however, such a correction is the only alternative to the continued erosion of our dollars.
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Greenspan's Black Magic
23 February 2004 Texas Straight Talk 23 February 2004 verse 2 ... Cached
In testimony before the House Financial Services Committee last week, Federal Reserve Chairman Alan Greenspan painted a rosy picture of the U.S. economy. In his eyes, the Fed’s aggressive expansion of the money supply and suppression of interest rates have strengthened the financial condition of American households and industries. If this is true, however, our nation’s "prosperity" is merely a temporary illusion based on smoke and mirrors. True wealth cannot be created simply by printing money; families and businesses cannot prosper by getting deeper in debt.
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Greenspan's Black Magic
23 February 2004 Texas Straight Talk 23 February 2004 verse 4 ... Cached
Never mind, says Mr. Greenspan. Mortgage refinancing, made wildly popular by artificially low interest rates established by the Fed, will be the saving grace of American households. They can simply borrow against their homes to finance living beyond their means, a practice encouraged by Fed policies. But what happens when home prices stop going up? What happens when families reach a point where they cannot make payments on two, three, or even more mortgages? How can the Fed chairman equate mortgage credit with real economic growth?
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Greenspan's Black Magic
23 February 2004 Texas Straight Talk 23 February 2004 verse 8 ... Cached
The end may come when foreign central banks realize the dollars they receive are worthless, or when they find other places to turn for income. When that day comes, interest rates will rise, perhaps dramatically. At that point not even Mr. Greenspan will be able to save the economy from the painful correction necessitated by his easy credit, easy money policies.
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The Federal Reserve Debt Engine
26 April 2004 Texas Straight Talk 26 April 2004 verse 2 ... Cached
Federal Reserve Chairman Alan Greenspan testifies for both US House and Senate committees several times each year, and last week appeared before the Joint Economic committee on which I serve. These appearances by Mr. Greenspan always cause quite a stir on Capitol Hill. Often the stock markets react within hours of his pronouncements regarding the health of the economy and the future of interest rates.
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The Federal Reserve Debt Engine
26 April 2004 Texas Straight Talk 26 April 2004 verse 4 ... Cached
Judging by Mr. Greenspan’s statements to a Senate committee in February, Fed economists are confusing debt with wealth. Mr. Greenspan praises the “sustained expansion of the US economy,” but then goes on to highlight the real reason for the expansion: loose monetary policy and near-zero interest rates. Since Fed bankers set interest rates artificially low, the cost of borrowing money is very cheap. This leads to more and more consumer spending, which Mr. Greenspan touts as the driving force for economic growth.
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The Federal Reserve Debt Engine
26 April 2004 Texas Straight Talk 26 April 2004 verse 7 ... Cached
It’s not enough to question the wisdom of Mr. Greenspan. Americans should question why we have a central bank at all, and whose interests it serves. The laws of supply and demand work better than any central banker to determine both the correct supply of money in the economy and the interest rate at which capital is available- without the political favoritism and secrecy that characterize central banks. Americans should not tolerate the manipulation of our economy and the inflation of our currency by an unaccountable institution.
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Superpower or Superdebtor?
07 June 2004 Texas Straight Talk 07 June 2004 verse 4 ... Cached
It is clear that interventionism leads to the perceived need for more interventionism, which leads to more conflict and to increased resentment and anti-Americanism. It is an endless cycle and the American taxpayer is always left holding the bill. This policy has huge dollar costs at home, which contributes to huge deficits, higher interest rates, inflation, and economic dislocations. War cannot raise the standard of living for the average American.
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Zero Down for the American Dream
21 June 2004 Texas Straight Talk 21 June 2004 verse 7 ... Cached
Despite the congressional rhetoric about helping the poor, federal housing policies often harm poor people by pushing them into houses they may not be ready to buy. Given the realities of insurance, property taxes, maintenance, and repairs, many low-income buyers lose their homes and destroy their credit ratings. Easy credit and low interest rates, courtesy of the Federal Reserve, have dramatically increased housing demand and artificially increased prices. Zero down payment schemes do the same thing by pushing renters into the housing market. This increased demand actually serves to price many poor Americans out of the housing market indefinitely.
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The IMF Con
27 September 2004 Texas Straight Talk 27 September 2004 verse 4 ... Cached
The IMF provides a perfect illustration of the both the folly of foreign aid and the real motivations behind it. The IMF touts itself as a bank of sorts, although it makes “loans” that no rational bank would consider-- mostly to shaky governments with weak economies and unstable currencies. The IMF has little incentive to operate profitably like a private bank, since its funding comes mostly from a credulous US Congress that demands little accountability. As a result, it is free to make high-risk loans at below- market interest rates.
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The IMF Con
27 September 2004 Texas Straight Talk 27 September 2004 verse 8 ... Cached
American taxpayers already lend various governments more than $5 billion annually through the IMF, at a yearly cost of over $300 million because of loan defaults and subsidized interest rates. Now the IMF wants to double its pool of funding, which will put taxpayers on the hook for $12 billion in loans at a cost of about $750 million each year. Furthermore, since the IMF creates “drawing rights” accounts that are redeemable in US dollars, it in essence prints US dollars when it increases those drawing rights. This is a clear violation of our national sovereignty, and a vivid example of why we should stop participating in international schemes like the IMF altogether.
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"I Have a Plan..."
18 October 2004 Texas Straight Talk 18 October 2004 verse 5 ... Cached
Remember, there is a simple dictionary definition for government planning of the production and provision of goods and services: socialism. No matter how much the grand planners from both political parties deny it, many of their programs and proposals are socialist. Federal taxes, regulations, welfare, subsidies, wage controls, price controls, and interest rate manipulations all represent socialist interventions in the economy. True, we do not yet have a fully socialist economy. But that is why we must be vigilant and label socialist proposals for exactly what they are, so we can maintain and expand economic freedom in America.
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Raising the Debt Limit: A Disgrace
22 November 2004 Texas Straight Talk 22 November 2004 verse 7 ... Cached
Increasing the national debt sends a signal to investors that the government is not serious about reining in spending. This increases the risks that investors will be reluctant to buy government debt instruments. The effects on the American economy could be devastating. The only reason we have been able to endure such large deficits without skyrocketing interest rates is the willingness of foreign nations to buy the federal government’s debt instruments. However, the recent fall in the value of the dollar and rise in the price of gold indicate that investors may be unwilling to continue to prop up our debt-ridden economy. Furthermore, increasing the national debt will provide more incentive for foreign investors to stop buying federal debt at current interest rates. What will happen to our already fragile economy if the Federal Reserve must raise interest rates to levels unseen since the seventies to persuade foreigners to buy our debts?
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Gold Exposes the Dollar
06 December 2004 Texas Straight Talk 06 December 2004 verse 8 ... Cached
Washington seems oblivious to the problem. Our current account deficit is roughly 6% of GDP, and our total foreign indebtedness is over $3 trillion. We borrow $1.8 billion every day! Unfortunately, our politicians and the public will ignore the problem until the combination of dollar inflation, price inflation, and higher interest rates brings the borrowing frenzy to an end. Americans, like their government, seem to have lost the ability to live within their means. When their standard of living falls, however, they will look for someone to blame in Washington.
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It Can't Happen Here
20 December 2004 Texas Straight Talk 20 December 2004 verse 10 ... Cached
It may be true that average Americans do not feel intimidated by the encroachment of the police state. Americans remain tolerant of what they see as mere nuisances because they have been deluded into believing total government supervision is necessary and helpful, and because they still enjoy a high level of material comfort. That tolerance may wane, however, as our standard of living falls due to spiraling debt, endless deficit spending at home and abroad, a declining fiat dollar, inflation, higher interest rates, and failing entitlement programs. At that point attitudes toward omnipotent government may change, but the trend toward authoritarianism will be difficult to reverse.
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The Maestro Changes his Tune
21 February 2005 Texas Straight Talk 21 February 2005 verse 7 ... Cached
Second, inflation is a much greater problem than the federal government admits. Health care, housing, and energy are three areas where costs have risen dramatically. The producer price index is rising at the fastest rate in seven years. Bond prices are rising. To suggest that rapid expansion of the money supply and artificially low interest rates do not ultimately cause price inflation is absurd.
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The Maestro Changes his Tune
21 February 2005 Texas Straight Talk 21 February 2005 verse 9 ... Cached
It’s not enough to question the wisdom of Mr. Greenspan. Americans should question why we have a central bank at all, and whose interests it serves. The laws of supply and demand work better than any central banker to determine both the correct supply of money in the economy and the interest rate at which capital is available- without the political favoritism and secrecy that characterize central banks. Americans should not tolerate the manipulation of our economy and the inflation of our currency by an unaccountable institution.
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Deficits Make You Poorer
14 March 2005 Texas Straight Talk 14 March 2005 verse 10 ... Cached
The economic situation today is reminiscent of the 1970s. The economic malaise of that era resulted from the profligacy of the 1960s, when Congress wildly expanded the welfare state and fought an expensive war in southeast Asia. Large federal deficits led to stagflation-- a combination of high price inflation, high interest rates, high unemployment, and stagnant economic growth. I fear that today’s economic fundamentals are worse than the 1970s: federal deficits are higher, the supply of fiat dollars is much greater, and personal savings rates are much lower. If the federal government won’t stop spending, borrowing, printing, and taxing, we may find ourselves in far worse shape than 30 years ago.
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Congress and the Federal Reserve Erode Your Dollars
23 May 2005 Texas Straight Talk 23 May 2005 verse 7 ... Cached
Unlike wealthy currency traders, most Americans are stuck with their U.S. dollars. Average people, particularly those who depend on savings or fixed incomes to fund their retirement years, cannot abide the continued devaluation of our currency. A true strong-dollar policy would not depend on the actions of China or any other nation. It would, however, require a constriction of the money supply and higher interest rates, both of which would cause some short-term pain for the American economy. In the long run, however, such a correction is the only alternative to the continued erosion of our dollars.
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More of the Same at the Federal Reserve
28 November 2005 Texas Straight Talk 28 November 2005 verse 7 ... Cached
Inflation is not in check, as anyone who examines the cost of housing, energy, medical care, school tuition, and other basics can attest. In one sense the remarkable rise in housing prices over the last decade really just represents a drop in the value of the dollar. The artificial boom in the 1990s equity markets, engineered by Mr. Greenspan's relentless monetary expansion and interest rate cutting, ended badly for millions of Americans holding overinflated stocks. What will happen when the same thing happens with housing?
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The Real Washington Scandal
06 February 2006 Texas Straight Talk 06 February 2006 verse 4 ... Cached
Later this month our Treasury once again will hit the "debt ceiling," a figure based on federal law that limits the amount of money the federal government can borrow. The total amount of federal debt as of this month is a staggering $8.2 trillion, a number that is almost incomprehensible. The effects of this debt, however, will be felt by all of us in the form of inflation, higher interest rates, and a weakened U.S. economy.
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The Real Washington Scandal
06 February 2006 Texas Straight Talk 06 February 2006 verse 6 ... Cached
The simplest way for the Fed to overcome these fears and maintain worldwide enthusiasm for the dollar is to raise interest rates and stop putting new dollars into circulation. But the Greenspan "boom" was based on the opposite approach. By cutting interest rates to the bone and vastly increasing the money supply, Greenspan made Americans feel rich-- first with the stock market bubble of the 1990s, and later with the housing bubble that is only now starting to burst. Greenspan was brilliant at making debt feel like wealth, but Mr. Bernanke inherits a very difficult situation. To maintain the value of the dollar, he must put the brakes on the money supply and raise the cost of borrowing. Such tough action is unlikely, however, given Mr. Bernanke's troubling public statements about the benefits of government printing presses.
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Another "Emergency" Spending Bill
20 March 2006 Texas Straight Talk 20 March 2006 verse 9 ... Cached
The real emergency is in Washington, where Congress is spending and borrowing America into a perfect storm. As economist James Turk explains, the federal government now relies upon debt to finance 20% of its spending. Low interest rates during the 1990s and early 2000s kept interest payments on government debts- Treasury Bonds and Treasury Bills- somewhat manageable. During the same period, however, the Federal Reserve greatly increased the money supply, which has caught up to us in the form of price inflation. The Fed now must raise rates to combat this inflation, but higher interest rates will chill economic growth and slow tax revenue. To quote Mr. Turk, “The federal government faces a potentially toxic mix of constrained revenues, soaring expenditures, ballooning debt, and rising interest rates.”
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The Perils of Economic Ignorance
27 March 2006 Texas Straight Talk 27 March 2006 verse 3 ... Cached
Last week in this column I wrote of a perfect economic storm facing America, caused by a federal government that spends, borrows, and prints so much money that our dollars are eroding in value at an alarming rate. Year after year our federal government spends beyond its revenues, prints new money to pay its debts, and borrows hundreds of billions abroad in the form of Treasury obligations that someday must be paid. With too many dollars and debt instruments in circulation, and no political will in Washington to cut spending, we've created a monster. Our perceived prosperity depends on keeping the great debt and credit engine pumping, but the only way to attract new lenders to fuel the engine is higher interest rates. At some point one of two things must happen: either the party in Washington ends, or the supremacy of the dollar as the world's reserve currency ends. It's a sobering thought, but a choice must be made.
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Foreign Policy, Monetary Policy, and Gas Prices
08 May 2006 Texas Straight Talk 08 May 2006 verse 9 ... Cached
We also must understand the effect monetary policy has on gas prices. The price of gas, like the price of all things, goes up because of inflation. And inflation by definition is an increase in the money supply. The money supply is controlled by the Federal Reserve Bank, and responds to the deficits Congress creates. When deficits are excessive, as they are today, the Fed creates new dollars out of thin air to buy Treasury bills and keep interest rates artificially low. But when new money is created out of nothing, the money already in circulation loses value. Once this is recognized, prices rise-- some more rapidly than others. That’s what we see today with the cost of energy.
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The Declining Dollar Erodes Personal Savings
15 May 2006 Texas Straight Talk 15 May 2006 verse 7 ... Cached
As Mr. Mehring suggests, the Federal Reserve may have no choice but to raise interest rates to maintain foreign enthusiasm for our dollar. It’s a serious problem that new Fed Chair Benjamin Bernanke must address sooner or later: propping up the dollar with higher interest rates without killing the U.S. economy in the process.
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What Congress Can Do About High Gas Prices
31 July 2006 Texas Straight Talk 31 July 2006 verse 7 ... Cached
Third: We must remember that prices of all things go up because of inflation. Inflation by definition is an increase in the money supply. The money supply is controlled by the Federal Reserve Bank, and responds to the deficits Congress creates. When deficits are excessive, as they are today, the Fed creates new dollars out of thin air to buy Treasury bills and keep interest rates artificially low. But when new money is created out of nothing, the money already in circulation loses value. Once this is recognized, prices rise-- some more rapidly than others. That’s what we see today with the cost of energy.
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Your Taxes Subsidize China
14 August 2006 Texas Straight Talk 14 August 2006 verse 5 ... Cached
I offered an amendment before the House of Representatives last month that would have ended the $4 billion subsidy our nation quietly gives China through the US government's Export-Import Bank. The bank underwrites the purchases of goods and services by the Chinese government and others around the world. Unfortunately, only a minority of Democrats or Republicans supported my measure. Apparently, many members of Congress are happy to bash China, but don’t mind lending her U.S. taxpayer money at sweetheart interest rates.
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Monetary Inflation is the Problem
04 December 2006 Texas Straight Talk 04 December 2006 verse 5 ... Cached
Federal Reserve Chairman Ben Bernanke faces two basic ongoing choices: raise interest rates to prop up the dollar, but risk pushing the economy into a recession; or lower interest rates to stimulate the economy, but risk further declines in the dollar. This unfortunate dilemma is inherent with a fiat currency, however.
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Monetary Inflation is the Problem
04 December 2006 Texas Straight Talk 04 December 2006 verse 6 ... Cached
Of course Mr. Bernanke inherited this tightrope act from his predecessor Alan Greenspan. The Federal Reserve did two things to artificially expand the economy during the Greenspan era. First, it relentlessly lowered interest rates whenever growth slowed. Interest rates should be set by the free market, with the availability of savings determining the cost of borrowing money. In a healthy market economy, more savings equals lower interest rates. When savings rates are low, capital dries up and the cost of borrowing increases.
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Monetary Inflation is the Problem
04 December 2006 Texas Straight Talk 04 December 2006 verse 7 ... Cached
However, when the Fed sets interest rates artificially low, the cost of borrowing becomes cheap. Individuals incur greater amounts of debt, while businesses overextend themselves and grow without real gains in productivity. The bubble bursts quickly once the credit dries up and the bills cannot be paid.
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Monetary Policy is Critically Important
19 February 2007 Texas Straight Talk 19 February 2007 verse 3 ... Cached
Federal Reserve Chairman Ben Bernanke testifies twice every year before the congressional Financial Services committee, and I look forward to these opportunities to raise questions about monetary policy. I believe monetary policy is critically important yet overlooked in Washington. Money is the lifeblood of any economy, and control over a nation's currency means control over its economic well being. Fed bankers quite literally determine the value of our money, by controlling the supply of dollars and establishing interest rates. Their actions can make you richer or poorer overnight, in terms of the value of your savings and the buying power of your paycheck. So I urge all Americans to educate themselves about monetary policy, and better understand how a small group of unelected individuals at the Federal Reserve and Treasury department wield tremendous power over our lives.
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Don't Blame the Market for Housing Bubble
19 March 2007 Texas Straight Talk 19 March 2007 verse 5 ... Cached
But capitalism is not to blame for the housing bubble, the Federal Reserve is. Specifically, Fed intervention in the economy-- through the manipulation of interest rates and the creation of money-- caused the artificial boom in mortgage lending.
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Don't Blame the Market for Housing Bubble
19 March 2007 Texas Straight Talk 19 March 2007 verse 10 ... Cached
The Federal Reserve provides the mother’s milk for the booms and busts wrongly associated with a mythical “business cycle.” Imagine a Brinks truck driving down a busy street with the doors wide open, and money flying out everywhere, and you’ll have a pretty good analogy for Fed policies over the last two decades. Unless and until we get the Federal Reserve out of the business of creating money at will and setting interest rates, we will remain vulnerable to market bubbles and painful corrections. If housing prices plummet and millions of Americans find themselves owing more than their homes are worth, the blame lies squarely with Alan Greenspan and Ben Bernanke.
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The Federal Reserve Monopoly over Money
09 April 2007 Texas Straight Talk 09 April 2007 verse 4 ... Cached
Certainly it’s true that Mr. Bernanke can drastically affect the economy at the drop of a hat, simply by making decisions about the money supply and interest rates. But why do members of Congress assume this is good? Why do we accept without objection that a small group of people on the Federal Reserve Board wields so much power over our economic well-being? Is centralized, monopoly control over our money even compatible with a supposedly free-market economy?
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The Federal Reserve Monopoly over Money
09 April 2007 Texas Straight Talk 09 April 2007 verse 7 ... Cached
The Fed’s inflationary policies hurt older people the most. Older people generally rely on fixed incomes from pensions and Social Security, along with their savings. Inflation destroys the buying power of their fixed incomes, while low interest rates reduce any income from savings. So while Fed policies encourage younger people to overborrow because interest rates are so low, they also punish thrifty older people who saved for retirement.
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High Risk Credit
20 August 2007 Texas Straight Talk 20 August 2007 verse 6 ... Cached
In addition to the negative reactions in financial markets, many Americans have taken on too much personal debt owing to exotic mortgage products and artificially low interest rates. Unfortunately, these families are now in the position of losing their homes in unprecedented numbers as the teaser rates expire and the real bills are coming due.
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High Risk Credit
20 August 2007 Texas Straight Talk 20 August 2007 verse 7 ... Cached
The real answers are, and always have been, found in the principles of the free market. Let the market set the interest rates. If we had been functioning under a true and transparent free market system, we would not be in the mess we are in today. Government, like the American household, needs to live within its means to get back on stable fiscal ground.
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Economic Stimulus Concerns
27 January 2008 Texas Straight Talk 27 January 2008 verse 11 ... Cached
Sending out checks and cutting interest rates yet again is merely a shot in the arm when in actuality, the economy needs major surgery. I look forward to working with my colleagues in Congress to provide major tax relief to the American people.
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On Money, Inflation and Government
30 March 2008 Texas Straight Talk 30 March 2008 verse 6 ... Cached
The Federal Reserve, a quasi-government entity, should not be creating money or determining interest rates, as this causes malinvestment and excessive debt to accumulate. Centrally planned, government manipulated economies always fail eventually. The collapse of communism and the failure of socialism should have made this apparent. Even the most educated, well-intentioned central planners cannot plan the market better than the market itself. Those that understand economics best, understand this reality.
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Bailing Out Banks
13 April 2008 Texas Straight Talk 13 April 2008 verse 3 ... Cached
The current market crisis began because of Federal Reserve monetary policy during the early 2000s in which the Fed lowered the interest rate to a below-market rate. The artificially low rates led to overinvestment in housing and other malinvestments. When the first indications of market trouble began back in August of 2007, instead of holding back and allowing bad decision-makers to suffer the consequences of their actions, the Federal Reserve took aggressive, inflationary action to ensure that large Wall Street firms would not lose money. It began by lowering the discount rates, the rates of interest charged to banks who borrow directly from the Fed, and lengthening the terms of such loans. This eliminated much of the stigma from discount window borrowing and enabled troubled banks to come to the Fed directly for funding, pay only a slightly higher interest rate but also secure these loans for a period longer than just overnight.
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Big Government Responsible for Housing Bubble
11 May 2008 Texas Straight Talk 11 May 2008 verse 3 ... Cached
However, many in Washington fail to realize it was government intervention that brought on the current economic malaise in the first place. The Federal Reserve’s artificially low interest rates created the loose, easy credit that ignited a voracious appetite in the banks for borrowers. People made these lending and buying decisions based on market conditions that were wildly manipulated by government. But part of sound financial management should be recognizing untenable or falsified economic conditions and adjusting risk accordingly. Many banks failed to do that and are now looking to taxpayers to pick up the pieces. This is wrong-headed and unfair, but Congress is attempting to do it anyway.
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Rising Energy Prices and the Falling Dollar
09 June 2008 Texas Straight Talk 09 June 2008 verse 3 ... Cached
Part of the answer lies in understanding bubbles and monetary inflation, but especially the Federal Reserve System. The Federal Reserve is charged with controlling inflation through interest rate manipulation, however, many fail to realize that creating money, and therefore inflation, is really its only tool. When the Federal Reserve inflates the dollar as drastically as it has in the past few decades, the first users of the newly created money go in search of investments for their dollars. They must invest this money quickly and aggressively before it loses value. This causes certain sectors to expand beyond what would naturally occur in the free market. Eventually the sector overheats and the bubble bursts. Overinvestment in dotcoms eventually led to a collapse of the NASDAQ. Next we had the housing bubble, and now we are seeing the price of oil being bid up in the creation of another new bubble. Investors are now looking to commodities like oil, for stability and growth as they pull capital out of real estate. This increased demand for investment vehicles related to oil contributes to driving up the price of the actual product.
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.