Ron Paul
2001 Ron Paul Chapter 30

Inflation Is Still With Us

3 May 2001

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2001 Ron Paul 30:1
Mr. PAUL. Mr. Speaker, almost on a daily basis, government officials reassure us there is no inflation to worry about. But, today’s definition of inflation of rising prices as measured by an artificial CPI and PPI is seriously flawed. Rising prices are but one of the many consequences of true inflation — which is an increase in the supply of money and credit.

2001 Ron Paul 30:2
To understand the perversities of inflation one must look to the money supply. The money supply, as measured by M3, rose an astounding $42 billion last week and is up a whopping $210 billion in the past ten weeks. MZM, another important measure of inflation, is rising at the rate of 27%. Now that’s monetary debasement!

2001 Ron Paul 30:3
But rising prices, a reflection of monetary inflation, should not be dismissed as so many government economists have done. The current first quarter GDP report shows a 3.3% rise in the personal consumption price index, well above the 1.9% recorded in last year’s fourth quarter.

2001 Ron Paul 30:4
And what about the record prices for gasoline? To pretend that gasoline prices pose little threat to American consumers is naive — not to mention the skyrocketing electricity bills they also face.

2001 Ron Paul 30:5
The most serious economic myth that Federal Reserve economists perpetuate is that a booming economy causes prices to rise and a slowing economy will hold “inflation” in check. Ever since 1971, when the fiat dollar was established, records show that during each of our economic slumps, prices rose even faster than they did during periods of economic growth, supporting the argument that rising prices are a consequence of monetary policy.

2001 Ron Paul 30:6
Although the economy is now slowing, and fuel prices are skyrocketing for the airlines, Delta pilots are receiving salary increases of between 24 and 34%. Other evidence of labor cost increases is now available even with the large and growing number of announced layoffs. Wage prices pressure is more often than not a consequence of monetary policy, not a tight labor market.

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.

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.

2001 Ron Paul 30:9
A sad consequence of today’s conditions is that monetary policy encourages transfer of wealth and power to the undeserving. The victims of bad monetary policy then blame capitalism for the inequities. The leftist demonstrators at recent WTO, IMF, and World Bank meetings make a legitimate point that the current system has resulted in accumulation of wealth and power in the hands of some at the expense of others.

2001 Ron Paul 30:10
But this is an expected consequence of monetary debasement, which generally leads to social unrest. But, blaming capitalism and freedom for the harm done by inflationism, special interest corporatism, and interventionism presents a danger to us all, since the case for commodity money and individual liberty is lost in the shouting. Unless this message is heard and distinguished from the current system, freedom and prosperity will be lost. Leaders of the current worldwide system that has evolved since the collapse of the Soviet empire pay lip service to free trade and free markets, but tragically they are moving us toward a fascist system of partnerships with government, big businesss, and international banking at the expense of the middle class and the poor.

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