Surrender to the Printing Presses

In his latest essay Dr. Ron Paul accurately diagnoses the government’s money dilemma and prescribes a painful but effective cure. We the people are in agreement, but our decadent politicians and bankers have decided to prolong the “easy credit” bonanza for as long as they possibly can. Are they oblivious to the risk of total financial collapse and the potentially devastating consequences?

Washington’s Intervention Addiction

by Ron Paul

One problem with politicians is that when problems they create come to a head, they typically feel this irresistible urge to DO something, rather than to UN-do something, or to simply back off to avoid exacerbating the situation. Too often, that which they end up doing has very little connection to the cause of the crisis, but plays well in the press and superficially makes everyone feel better. Bills that are rushed through Congress under duress are never studied enough, providing too tempting an opportunity to quietly slip in unrelated provisions that erode freedoms in ways that would never pass as a stand-alone bill. We famously saw this with the PATRIOT Act, but Washington learned nothing from that.

The current housing crisis and the corresponding big government fix are another prime example. First of all, the so-called solution will actually make the problem worse. The problem stems from easy credit and a rush to flood the housing and mortgage markets with money. Relaxed or non-existent lending standards led many into mortgages and houses they could not afford. As more foreclosures hit, the lending institutions will continue collapsing like dominoes under the weight of all the bad paper they underwrote. Some are reacting and reintroducing lending standards. Thus the number of buyers in the market for homes is beginning to shrink back to its natural size, and hyper-inflated prices are falling back down to earth. In these ways, the market is trying to correct itself in the wake of the mistakes government intervention encouraged them to make through easy credit. However, this correction is causing pain, especially to Wall Street investors and those who bought homes at the top of the market bubble, never expecting it to crash, always assuming they would easily be able to refinance.

Some mistakenly identify the falling home prices as the disease instead of merely a symptom – which they plan to fix with more easy credit and more liquidity to push more unqualified buyers back into the market for homes they still cannot afford. This is akin to the drug addict identifying withdrawal symptoms as his problem and searching for another fix as his solution. The cycle continues and the problems compound themselves. The addiction deepens.

Addicts are told the first step to recovery is to admit their problem. To cure this addiction to intervention we have to honestly admit the problem and once and for all, kick the habit. That will involve some pain, without a doubt. There is no easy, painless solution to the mess the disastrous economic interventions of the past have wrought. The question is – do we allow some lending institutions to collapse, or do we allow the dollar to collapse? To extend the metaphor, do we endure the temporary discomfort of withdrawal, or do we continue on until there is a fatal overdose? We can delay the agony, but only for a little while, and then we will all end up paying the price for the mistakes of a few.

With the final passage of the Housing Bailout Bill quietly on a Saturday in the Senate, and the President’s signature, our government has unfortunately chosen the latter…

  • Most folks don’t understand why we have hyper-inflation; thank god Ron Paul knows the score! Inflation occurs when the sum of all the Federal Reserve Notes(our “money”) in circulation(a.k.a.,”currency”) is artificially greater than the American Gross Domestic Product. Our economy is out of balance!
    Ron Paul wants to return balance by limiting the amount of “easy credit” that has sadly flooded our markets!

    For example: let’s say that we have a 100 hamburgers that are worth $1 a piece. So if we circulated $100 worth of $1 bills…there would be no hyperinflation…a hamburger will remain $1. But what if we flooded the market with “$100” more of “easy credit”….there would be an imbalance…therefore vendors must sell their hamburgers for at least $2 per hamburger to restore balance back to the market! If the vendors didn’t raise the price of a hamburger from $1 to $2…then ultimately vendors would run out of resources(hamburgers) and there would be chaos. And to further complicate things…only the ones with the most “money” will be able to afford our limited resource of hamburgers!
    This is how hyperinflation works. Too much currency and too little resources.
    This is why Ron Paul is against the government mortgage crisis bailout! Increasing the money supply artificially IS NOT TRUE GROWTH. It’s more like a free lunch at the expense of hard working american taxpayers! This is why our US DOLLAR is so weak…there’s just too much money in circulation and too little resources! So who really suffers? The poor and the middle class. And who does hyperinflation hurt the least? That would be the super rich elitists.
    Why do you think gas prices are so high? Because it is a limited resource… The Federal Reserve aren’t helping by injecting more US Dollars into the market…because this will only cause gas prices to increase. We need to inject more alternative fuels into our markets in order to lower gas prices.
    Conclusion: We must stop the printing presses and limit the amount of currency in circulation in relation to our Limited Resources. Our money should have a limited lifespan…or it will continue to devalue the US Dollar via hyperinflation.