Ron Paul’s Joint Economic Committee Statement




“Mr. Chairman, I believe that our economy faces a bleak future, particularly if the latest $700 billion bailout plan ends up passing. We risk committing the same errors that prolonged the misery of the Great Depression, namely keeping prices from falling. Instead of allowing overvalued financial assets to take a hit and trade on the market at a more realistic value, the government seeks to purchase overvalued or worthless assets and hold them in the unrealistic hope that at some point in the next few decades, someone might be willing to purchase them.

One of the perverse effects of this bailout proposal is that the worst-performing firms, and those who interjected themselves most deeply into mortgage-backed securities, credit default swaps, and special investment vehicles will be those who benefit the most from this bailout. As with the bailout of airlines in the aftermath of 9/11, those businesses who were the least efficient, least productive, and least concerned with serving consumers are those who will be rewarded for their mismanagement with a government handout, rather than the failure of their company that is proper to the market. This creates a dangerous moral hazard, as the precedent of bailing out reckless lending will lead to even more reckless lending and irresponsible behavior on the part of financial firms in the future.

This bailout is a slipshod proposal, slapped together haphazardly and forced on an unwilling Congress with the threat that not passing it will lead to the collapse of the financial system. Some of the proposed alternatives are no better, for instance those which propose a government equity share in bailed-out companies. That we have come to a point where outright purchases of private sector companies is not only proposed but accepted by many who claim to be defenders of free markets bodes ill for the future of American society.

As with many other government proposals, the opportunity cost of this bailout goes unmentioned. $700 billion tied up in illiquid assets is $700 billion that is not put to productive use. That amount of money in the private sector could be used to research new technologies, start small business that create thousands of jobs, or upgrade vital infrastructure. Instead, that money will be siphoned off into unproductive assets which may burden the government for years to come. The great French economist Frederic Bastiat is famous for explaining the difference between what is seen and what is unseen. In this case the bailout’s proponents see the alleged benefits, while they fail to see the jobs, businesses, and technologies not created due to this utter waste of money.

The housing bubble has burst, unemployment is on the rise, and the dollar weakens every day. Unfortunately our leaders have failed to learn from the mistakes of previous generations and continue to lead us down the road toward economic ruin.”



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8 Comments:

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  2. dear ron paul,
    in this country the british prime minister makes great play that he was not to blame for the british sub prime bad mortgages affair but its all the fault of the u.s. etc... since he was british xchancellor of exchequer with blair as p.m. should he have not regulated this massive borrowing? -instead of blaming it on america's crisis-perhaps in the same way that bank america or fed reserve should have done? i know the conservatives in england are making great play of this in their conference this week.

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  3. Does anyone else around here get the sense that we're kicking cactus or yelling "fire" in a burnt out building? We're done as a free nation. All that's left is seeing how this unstoppable march towards this so called' New world odor" plays itself out.

    Watching these so called conservative politicians speak on CNN (McCain et al) tell us how we must hold our nose and accept this fraud called a "bailout" makes me realize we've been had. While the house is still made up of many independent thinking conservatives on the Republican side (like Ron), most politicians these days are funded by nefarious entities, bankers and corporations that have been running our government for quite some time. We as a nation keep being been set-up like a bowling pin time and time again (think 911). If I were cynical I'd believe that the puppet-masters chose McCain because his father who was a key figure in covering up and brushing over the Israel attack of the USS Liberty (false flag op to get us to hate their enemies basically) Maybe they know the apple doesn't fall far from the tree. Maybe they think he'll keep our country on this highway to hell we've been on for quite some time. Not that Obama wasn't bought and paid for by AIPAC either, nor the Clintons, nor the Bush's. Both parties have continued to keep us on a path towards destruction, and the effects of their treason is becoming more and more obvious every day. I have little hope things will change and simply spend my time and energy preparing for the future. That doesn't mean I don't appreciate true Patriots who continue to scream the truth from the rooftops! Bravo! Beep up the good work Ron. You have my support!

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  4. Heaven forbids someone with real answers and sense actually get into the oval office, this is truly a sad day for America, they have truly not learned a thing from history and sadly no one is telling the current emperor he has no clothes on. the delusion prevailing office would be comical had it not been so serious. this is truly a time of mass insanity.

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  5. Steve,
    What an interesting thought. I was in DC a month ago and some polical blob was speaking at the meeting I was working. At one point he said something peculiar. It was something to the effect that certain Conservatives in Washington had decided the only way to get things back on track in Washington was to bankrupt the system.

    I have been trying to reconcile A G's early writings with what his actions have been in the last few years. Maybe this just tied them together.

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  6. John Galt was famed for stopping the motor of the world. I can't help thinking that Alan Greenspan, a self-professed follower of Rand's Objectivist theories, has done the same.

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  7. "I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents." -James Madison

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  8. Ron is doing a great job. Wish he would hit on the Internal Revenue Code and the IRS. The archaic tax code is what the G uses to manipulate the flow of capital that has got us into this mess. He talks about lowering taxes but not about repealing the income tax. I just represented Irwin Schiff on appeal and it is brutal what they did to him.

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