In his latest video update Ron Paul addresses important issues such as the housing bailout, the stimulus package, Obama’s war in Afghanistan, and the destruction of the dollar.
Source: Campaign for Liberty
Ron Paul: Well the administration has just announced a new bailout for the housing market, 275 billion dollars; 75 billion dollars of new money and 200 billion dollars coming from the TARP funds that would go to propping up Fanny Mae and Freddie Mac. But so far the markets aren’t buying it, the markets still remain in the doldrums and it seems like in the past year one program after another. More spending, more borrowing, more inflating and there’s no reassurance but we shouldn’t be surprised because we can’t get out of this mess by merely doing what we’ve been doing all along getting us into this mess.
But the whole idea that the people who have been paying their mortgages should now suffer the consequence of bailing out those who can’t pay their mortgages; those individuals who got mortgages, that really didn’t qualify, no down payments, borrowed against the increase and the value of their house. And now they’re saying: “Well there’s 92%. See it’s about 92% of the people are doing okay and paying their mortgage.” 8% of defaults are causing these problems that we have and I’m sure there’s some innocent people being involved and ultimately a lot of innocent people suffer from the dependency on inflation. Inflation of course is when the Federal Reserve tries to solve its problems or manage the economy by increasing money and credit out of thin air and artificially fixing interest rates.
But a characteristic of monetary inflation is the middles class gets wiped out. So right now the middle class has not been wiped out but if we continue to do this, we will wipe out the middle class. But right now what we’re trying to do is find more victims and the victims have to be those individuals who have been paying their mortgages, probably saving some money and living within their means and now they have to bail out not only those who didn’t pay their mortgages but all the Wall Streeters, the mortgage companies, insurance companies, the housing industry and the developers and the builders; they’ll all want bail out too and of course the banks on Wall Street as well had been getting this bail out.
But it can’t work, it won’t work and the sooner we wake up and realize what we need, we need to allow the market to liquidate the bad debt, get rid of the mal-investment, encourage people not to spend but encourage people to live within their means; pay their bills, get rid of their debt and save some money. And when that is accomplished and there’s a little bit of money in the bank and they’re feeling better about themselves they’ll go back to spending but the faster that occurs the better. But everything the government has done in the past year has delayed the correction and that’s why we’re facing serious consequences in the future because right now I don’t see any decent proposals coming out of Washington; either from the administration, from the Federal Reserve or the Congress. It’s all more the same, sadly so.
Lately I’ve been getting more questions about Afghanistan, they want to know what I think is happening over there. So far I don’t think anything good is happening because right now we’re having another military surge and all I can say about it is Obama’s sticking to his word because he was honest with us during the campaign. He did say that he would send more troops into Afghanistan and he is but I can’t see how anything good will come from it.
We’re not learning one thing from history; whether it was the British or whether it was the Soviets, it’s a dead end street to try to militarize Afghanistan. As bad as Iraq is and has been, Afghanistan is going to be much worse. But Obama has announced that 17,000 more troops will be moved in there, that along with the troops we already have that will take us up to 60,000 plus the troops from our allies under NATO, the troops’ level will be up to a hundred, hundred thousand. The Soviets at one time had a hundred fifty thousand troops in there and they couldn’t control Afghanistan. And it is very costly and it looks like it’s going to be a quagmire and I see no good purpose coming from this. And unfortunately if this thing gets out of control which it very well could because we’re literally bombing Pakistan from Afghanistan and this war is liable to spread which means if it gets out of control it’s going to move us in the direction of the administration wanting to oppose the military draft on our young people. The sooner we get out of Afghanistan the better.
The market certainly did not do well this week; whether it was the signal we’re getting from gold, the signal we’re getting from the stocks, things look very bad and it shouldn’t surprise us. A lot of people say that we’ve been in a bear market since the fall of 2007, but I don’t believe that’s true. I think the market place has been in a bear market since the year 2000. Yes the Dow reached new highs but that was only because of the tremendous bubble that was built by the Federal Reserve through the inflation in the last 10 years and finally they built, after this Dow and the NASDAQ collapsed they were able to create a new bubble; the housing bubble and then that finally collapsed. Right now actually they’ve created a new bubble, one more bubble and that’s the bond market and that’s the last one that will finally dissipate.
But the markets are indicating that there’s no confidence in what the government is doing. No confidence in the Congress or the executive branch or in the Federal Reserve. And there’s an old saying that I think is appropriate it says “Pushing on a string”. They’re trying to push in a lot of credit and a lot of new financing but if the confidence isn’t there it doesn’t work and that’s what’s happening. The confidence is gone because the dollar system has ended. The dollar system that was devised after Bretton Woods in 1971, that is gone and they’re frantically trying to keep that together. But the best measurement of what they are doing in devaluing our currency is the traditional relationship of any currency to gold.
During the Bush years it was not good, the dollar lost 69% of its value in terms of gold. In the old days, if you had a 10% devaluation of currency it was big news but here it’s 69% devaluation and people hardly blink to nod because they don’t think in terms of gold and they don’t think in terms of constitution of money and they’re just thinking in terms of managing the economy and nobody paid any attention to it but it seems to be getting worse.
The one thing that has been very, very clear cut since Obama has become President and that is gold is acting almost only like a currency. A good, sound money, commodity money is both a good commodity as well as money. No one individual of one country makes gold money, that came about through history and is by tradition so it is money but it’s acting like money now. And gold of course before the week ended went over a thousand dollars. Just think, just think of the record of the Federal Reserve, and nobody really questions the Federal Reserve except more, there are a lot more all the time. But when the Federal Reserve took over, 1/20th of a dollar could buy 1/20th of an ounce of gold. Today a dollar would’ve bought 1/1000th of an ounce of gold and that is 98% depreciation of our money. And lo and behold, even the consumer price index, if you look at the consumer price index of 1913 compared to now it’ worth 3 to 4 cents, so it’s a very good measurement.
But the real message is that there’s a lot more inflation to come. This week everybody was just shocked; shocked because producer price index went up at a rate of 9% per year. In spite of the weak economy they say “Oh that’s just a fluke, that can’t happen.”You can’t have prices going up, you can’t have price inflation in the oncoming week. Demand is down, oil prices are supposed to drop; yeah but gasoline prices are going up, medical care costs are going up, insurance costs are going up because we have to look at the value of money.
So I think we’re seeing singles now, that there’s a lot more inflation to come and that the policies that we have been pursuing for the past year or so are nothing more than the policies that got us into this mess. And the sooner we wake up and realize what we need is a market economy and we need less spending, we need savings and then maybe we’ll get back to work and solve this problem.
But today in this past week, the markets did not send a very good signal and they’re reason to us in government that were doing the right thing. The signal is change our ways, the government should change our ways, the Federal Reserve should change our policies and quite frankly I think I intend to ask Bernanke some of these very same questions because he will be before the financial services committee next week and oh by the way, Volcker will be before the joint economic committee on which I sit so I might get to quiz him as well.