Ron Paul: Let The Market Regulate Itself!

Ron Paul questioned former Chairman of the Federal Reserve, Paul Volcker, at a Joint Economic Committee (JEC) hearing ominously titled “Wall Street to Main Street: Is the Credit Crisis Over and What Can the Federal Government Do to Prevent Unnecessary Systemic Risk in the Future?

Ron Paul expressed his disapproval of reserve requirements going down to zero, and criticized the Fed not just for buying rapidly declining housing securities, but also for talking about using credit card securities, car loan securities and student loan securities to back the creation of new “money”:

One thing I don’t think we ever do is define “capital”. We talk about “capital”, but in capitalism, in the free markets, capital comes from savings. Well, we don’t have any savings! Capital [now] comes out of thin air and we’ve had the luxury of creating as much so-called capital as we want because we were able to issue the reserve currency of the world. You mentioned the problem that we have is overconsumption. Well, that wouldn’t occur if we had a commodity standard in money, because it holds you in check.

Ron Paul went on to state that bailouts just make the problem worse and that while he does believe in regulation, it was government regulation that distorted the market and caused malinvestment:

Everybody said, “Well, bailing out Bear Stearns was just wonderful”. Well that to me is sort of like saying, if you have a drug addict having a withdrawal symptom you give him another fix and he feels good, then everything is going to be okay. So I don’t think that can be that reassuring to us because we have so many, many problems that we still face.

And, I believe in regulation. But I don’t believe for a minute that it’s a lack of government regulation that is our problem. It was the fact that the government had licensed the Federal Reserve to distort the market, create capital out of thin air, distort interest rates, cause the malinvestment, the excessive debt.

The market is a good regulator. The market, through interest rate changes, gives us signals that we should follow, but we don’t have that anymore. But just to say “all we need is more regulation”, I think it’s sort of like saying that we need regulations for something that is unregulatable, because the system is so artificial. It has nothing to do with the market economy.

So I really fear when I hear statements “well it’s the free market that is the problem”, rather than asking, “where did the bubble come from?”. And I think it’s very, very precise and very clear where financial bubbles come from and we have to deal with that.

Watch the rest of Ron Paul’s statement, the questions he asked, and Paul Volcker’s response in the video at the top of this post, or watch the full hearing here.

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  • rp

    “The very people who with somber faces tell us of their deep concern for the spread of democracy around the world are the ones most insistent on forcing a bill through Congress that the American people overwhelmingly oppose.” Ron Paul


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  • Jerry Martin


    Suppose you were an idiot. And suppose you were a member of Congress….But then I repeat myself.
    -Mark Twain

    I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.
    -Winston Churchill

    A government which robs Peter to pay Paul can always depend on the support of Paul.
    -.George Bernard Shaw

    A liberal is someone who feels a great debt to his fellow man ..which debt he proposes to pay off with your money.
    -G. Gordon Liddy

    Democracy must be something more than two wolves and a sheep voting on what to have for dinner.
    -James Bovard, Civil Libertarian (1994)

    Foreign aid might be defined as a transfer of money from poor people in rich countries to rich people in poor countries.
    -Douglas Casey, Classmate of Bill Clinton at Georgetown Univ ersity

    Giving money and power to government is like giving whiskey and car keys to teenage boys.
    -P.J. O’Rourke, Civil Libertarian

    Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.
    -Frederic Bastiat, French Economist (1801-1850)

    Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

    -Ronald Reagan (1986)

    I don’t make jokes. I just watch the government and report the facts.
    -Will Rogers

    If you think health care is expensive now, wait until you see what it costs when it’s free!
    -P.J. O’Rourke

    In general, the art of government consists of taking as much money as possible from one party of the citizens to give to the other.
    -Voltaire (1764)

    Just because you do not take an interest in politics doesn’t mean politics won’t take an interest in you!
    -Pericles (430 B.C.)

    No man’s life, liberty, or property is safe while the legislature is in session.
    -Mark Twain (1866)

    Talk is cheap…except when Congress does it.

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    -Ronald Reagan

    The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery.
    -Winston Churchill

    The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.
    -Mark Twain

    The ultimate result of shielding men from the effects of folly is to fill the world with fools.
    -Herbert Spencer, English Philosopher (1820-1903)

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    What this country needs are more unemployed politicians.
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    A government big enough to give you everything you want, is strong enough to take everything you have.
    -Thomas Jefferson

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  • CG

    You mentioned the problem that we have is overconsumption.
    Well, that wouldn’t occur if we had a commodity standard in money, because it holds you in check.

    Yeah, the system we have now is NOT capitalism, it is a corptocracy.
    Over consumption could not happen in a true capitalist society.

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  • Andy

    Volcker admits that the US economy is not a free market based economy. He says that since we live in a “different kind of market,” we need controls and regulations to keep people from going to extremes, as they did in the past according to him. Where does he read his history? When did market forces go to extremes in the presence of high interest rates? How are high interest rates imposed by a free market going to encourage people to over-invest in capital? One does not need a history lesson to understand this; all one needs is a capacity for reason and logic, which it seems Volcker lacks.

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