2000 Ron Paul 86:2
Mr. Speaker,
over the
last 3 years to
4
years, I have come to the floor on numerous occasions trying to sound a
warning about both our foreign policy and our monetary policy. Today
our monetary policy and our foreign policy have clashed. We see now
that we face serious problems, not only in the Middle East, but on our
financial markets.
2000 Ron Paul 86:3
Yesterday, I
talked a
bit about what I see as a financial bubble that has developed over the
past decade and made the point that a financial bubble can be financed
through borrowing money, as well as inflation. A financial bubble is
essentially a consequence of inflation. A lot of people talk about
inflation being the mere rising of some prices, but that is not the
case.
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.
2000 Ron Paul 86:5
I believe this
is
what has happened for the past 10 years. Mr. Speaker, so in spite of
the grand prosperity that we have had for this past decade, I believe
it is an illusion in many ways, because we have not paid for it. In a
true capitalist society, true wealth comes from hard work and savings.
2000 Ron Paul 86:6
Today, the
American
people have a negative savings rate, which means that we get our
so-called capital from a printing press, because there are no savings
and no funds to invest. The Federal Reserve creates these funds to be
invested. On a short-term, this seems to benefit everyone.
2000 Ron Paul 86:7
The poor like
it
because they seem to get welfare benefits from it; and certainly the
rich like it, because it motivates and stimulates their businesses; and
politicians like it, because it takes care of deficits and it
stimulates the economy.
2000 Ron Paul 86:8
The only
problem with
this is it always ends, and it always ends badly. And this is the
reason that we have to meet up with a policy that seems ridiculous. The
economy seems to be doing quite well, but the Federal Reserve comes
along and says there is a problem with economic growth. Economic growth
might cause prices to go up; so, therefore, what we have to do is cut
off the economic growth. If you have slower growth, the prices will not
go up any longer.
2000 Ron Paul 86:9
They are
talking
about a symptom and not the cause. The cause is the Federal Reserve.
The problem is that the Federal Reserve has been granted authority that
is unconstitutional to go and counterfeit money, and until we recognize
that and deal with that, we will continue to have financial problems.
2000 Ron Paul 86:10
We have heard
that
the 1990s was a different decade, it was a new era, economy, exactly
what we heard throughout the decade prior to the collapse of the
markets in Japan. The markets have now been down more than 50 percent
in Japan for more than 10 years, and there is no sign of significant
recovery there.
2000 Ron Paul 86:11
Also there
were other
times in our
history when they talked about a new era economy.
2000 Ron Paul 86:12
Let me read a
quote:
‘With growing optimism, they gave birth to a foolish idea called the
New Economic Era. That notion spread over the whole country. We were
assured that we were in a new period where the old laws of economics no
longer applied.’ Herbert Hoover in his memoirs.
2000 Ron Paul 86:13
It is an
illusion to
believe that the new paradigm exists. Actually, the computer industry
involves 5 percent of the economy; 95 percent is what they called the
old economy. I ascribe to old economic laws, because the truth is, we
cannot change economic laws. And if inflating a currency distorts the
market and the boom leads to the bust, that cannot be repelled.
2000 Ron Paul 86:14
If we are
looking
towards bad times, it is not because of current policy, it is because
of previous policy, the previous policy of the 10 years, the time when
we live beyond our means. We say how did we live beyond our means?
Where did the money come from? Are we not spending less than
Washington? No, we are not spending less in Washington. Are not the
deficits a lot less? They are less, but they are not gone.
2000 Ron Paul 86:15
Where did we
borrow
from? We borrowed from overseas. We have a current account deficit that
requires over a billion dollars a day that we borrow from foreigners
just to finance our current account deficit. We are now the greatest
debtor in the world, and that is a problem. This is why the markets are
shaky, and this is why the markets have been going down for 6 months,
and this is why in a foreign policy crisis such as we are facing in the
Middle East, we will accentuate these problems. Therefore, the foreign
policy of military interventionism overseas is something that we should
seriously question.
