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2008 Ron Paul Chapter 59
“The Future of Financial Services: Exploring Solutions for the Market Crisis”
Statement before the Financial Services Committee
Full Committee Hearing
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.
2008 Ron Paul 59:2
One of the primary causes for the length and severity of the Great Depression in this country was the
federal government’s attempts at keeping prices artificially
elevated.
A typical example of getting causation backward, the federal government
assumed that falling prices caused the depression, whereas in reality
the falling prices were the result of the economic depression, and were
necessary to bring the economy back into equilibrium. In its
attempt
to keep agricultural prices high, the federal government began to pay
farmers to destroy their crops, while unemployed people lined up at
soup kitchens around the country.
2008 Ron Paul 59:3
A similar situation exists today, where many mortgage-backed securities
and other similar assets are horribly overvalued. The market
response
would be to allow these assets to be sold on the market at whatever
price they would bring. This would result in a shakeout of bad
debt
and a shorter, sharper correction than would otherwise occur.
Unfortunately, the political will to allow banks to take the
responsibility for their lending actions is at times lacking.
2008 Ron Paul 59:4
Many here in Congress are asking where the money for this bailout will come
from, and indeed it is a good question. $700 billion does not
just
materialize out of the ether, but then again neither do the hundreds of
billions of dollars that we spend every year to fund our imperial war
machine. We must the face the fact that our country is dead
broke, and
not just that, we are facing over $10 trillion in debt, and tens of
trillions more in unfunded liabilities. This $700 billion bailout
will
only increase that debt, and increase the amount of money we pay merely
to service the interest on that debt. The end result of this is
higher
taxes on our children and grandchildren, and the full-scale destruction
of the dollar.
2008 Ron Paul 59:5
The only viable solution to this financial crisis is to keep the government from intervening any
further. The Federal Reserve has already loaned hundreds of
billions
of dollars through its numerous lending facilities, and the Congress
has passed legislation authorizing further hundreds of billions of
dollars to bail out Fannie and Freddie, yet each successive crisis
event seems to be advertised as larger and more severe than the
previous one. It is time that this Congress put its foot down,
reject
the administration’s proposal, and allow the bust to work itself out so
that our economic hangover is not as severe as it might otherwise be.
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