Ron Paul: Federal Reserve Encourages Inflation To Lower Debt




Location: Congress
Date: 4/1/2009

Ron Paul: I rise in opposition to this resolution. You know, they say so often that there is not enough bipartisanship around here. We hear that complaint a lot of times. But you know, when I look at it, I see that there has been too much bipartisanship in creating the problem we’ve had. And it hasn’t been the last few days. This crisis that we’re in the midst of, this financial crisis, didn’t pop up here in the last sixty days. It didn’t pop up here in the last eight years, but has taken several decades for us to get to this point where we are today dealing with a budget that is just totally out of control and a monetary and economic system that is uncontrollable as well.

They said that this budget is going to be $3.6 dollars with a $1.1 dollar deficit. And the amazing thing is that a $1.1 dollar deficit is going to be $400 billion less than this year. I’ll wait and see if that really happens, because that probably won’t work out that way. Matter of fact, characteristically, the statistics that we hear and we talk about the budget are never reliable, especially when you’re in a recession. In a recession, nobody can predict the revenues. The revenues are going to be a lot lower and the expenditures are going to be a lot higher.

So, I am making a prediction that the spending will be over $4 trillion this year, and that the deficit is going to be over $2 trillion, and that the picture that we are looking at today is much worse than we are willing to admit. Matter of fact, I think the problem we face today is not so much a budgetary problem. It’s much different than that. We talk a lot about the budget. Just think of how many hours we talked about it today. But the budget and the deficit is a symptom of something much more serious, and that is what we have allowed our government to become. I think it has been the loss of respect by us here in the Congress to understand and take seriously Article 1 Section 8. If we did that, we wouldn’t be doing all these things that we are doing. If we understood the 10th amendment, we wouldn’t be doing all this, we wouldn’t have a deficit. If we understood monetary policy we wouldn’t have a monetary system that encourages all this that gets us off the hook.

Because conservatives like to spend a lot of money, and liberals like to spend a lot of money, and they don’t have to worry. We’ll raise taxes, we borrow it and we do it and have been doing it for decades and getting away with it. But it’s coming to an end because we’ve always been dependent on the Fed to come in and monetize the debt. Now, have they backed off in anyway? No. They are expending it. Not only do they buy in the market, they’re buying it directly from the treasury. They’re only encouraging us to do even more of this.

We have endorsed, as a Congress and as a people, a welfare-warfare state, and that is not part of what America is supposed to be. It encourages the spending and the borrowing and the deficits and all the inflation. Take for instance, we were supposed to get a lot of change with the new administration. One thing I was hoping about is that they might look at this overseas wild spending and expansion of the war going on in the Middle East…. but the military budget, the war budget is going up 9%. And as long as we have the expansion of war, the dependency of this spending overseas, we’re spending over a trillion dollars a year maintaining the world empire. At the same time, we have runaway spending here on welfare here at home. It is unsustainable.

We have a debt that will not be paid. We know that when it reaches a certain level, it cannot be paid. But it is always liquidated. Now, if an individual or a company goes into debt, it can be liquidated in the old fashion way of bankruptcy. Countries don’t go bankrupt. What they do is they default on the debt. It doesn’t mean they won’t pay it. They pay it off in bad money. And literally, the purpose of the Federal Reserve right now is to lower the real debt. So, if you destroy 50% of the value of the dollar in the next year or two, the real debt has gone down 50%. Literally, the Federal Reserve Board is praying for and encouraging inflation to lower the real debt because it can’t be sustained.

But who does that hurt? It hurts people who save. The people who save get 1% on their earnings and we tax the little bit they get and the people who are doing the right thing are being punished the most. So, the ones who lived beyond their means get bailed out. And it’s a very bad, bad system that we have and we have to decide what the role of government ought to be.

You know, we do blame the banks, we blame the business people and everybody. But you know, I have a lot of people come to my office and say, “Cut his, cut his, cut here, but don’t cut my program”. So, we have to decide as a people what should the role of government be. And if we think the role of government is going to be and should be the policeman of the world and to run a welfare state, this budgetary problem will never be solved.

Nancy Pelosi: Gentleman is recognized for 30 seconds.

Ron Paul: I thank you for yielding, and let me just close by saying that the greatest danger I see right now is the placing of the blame for the crisis that we’re in as if we had too much freedom, too much capitalism, not enough regulation. They did this in the 1930s and they are doing it even more now. Instead of saying that we overspent, overtaxed, overregulated, we have lost our confidence and if we don’t change that attitude and if we accept this notion and accept international regulation, believe me, we’re in big trouble. We will lose our freedoms and we will lose our sovereignty as well.



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One Comment:

  1. I can tell that this is not the first time at all that you mention the topic. Why have you decided to write about it again?

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