Ron Paul: No More Bailouts! Banks Should Be Allowed to Fail…

by Ron Paul

French businessman and economist Jean-Baptiste Say is credited with identifying the fundamental economic principle that aggregate demand for goods in an economy will equal the aggregate supply of goods when markets are permitted to operate.  Or in Say’s words, “products are paid for with products.”

English classical economist David Ricardo, among others, more fully developed this principle into what has become known as “Say’s Law.”  Say’s Law, according to Ricardo, leads us to understand that market equilibrium for goods is constant. This simply means that markets, when left alone by government planners or other fraudulent actors, inexorably tend toward an “equilibrium price” which eventually balances supply and demand for any particular good.  Thus markets will clear themselves of any surpluses or shortages in the form of excess supply and demand.

This important corollary of Say’s Law– that markets clear– is critical to understanding the moribund US housing market.  In housing, perhaps more than any other good, we see the terrible consequences of government and central bank interference with market forces.

First, the Federal Reserve Bank relentlessly increased the money supply over the last few decades.  Much of this newly created money and credit flowed from Fed member banks into the residential and commercial real estate markets, causing prices to rise dramatically prior to the housing bust of 2007.

At the same time, the Fed systematically suppressed interest rates for decades.  This led to tremendous malinvestment both by homebuilders and individuals, and encouraged a seedy subprime mortgage industry to make nonviable loans that would not make economic sense under market interest rates.

Congressional meddling in the mortgage market also added tremendously to the problem. Inane legislation like The Community Reinvestment Act literally forced banks to make thousands of loans to bad credit risks.  Similarly, Fannie Mae and Freddie Mac put taxpayers on the hook for millions of mortgages that never would meet market underwriting criteria.  And of course the real estate and homebuilder lobbies made sure mortgage interest debt (unlike most personal debt) remains tax-deductible.

The ultimate result of these interventions by our caring friends in Congress and the Fed has been the biggest housing bubble and crash in US history, leaving millions of Americans underwater on their mortgages if they have not already lost their houses altogether.  Congress and the Fed are directly responsible for millions of shattered lives, and almost unknowable economic damage in the form of trillions of dollars in mortgage backed securities.

The only solution to this mess is to allow the US housing market to clear.  All of the bad mortgage debt must be liquidated, whether via foreclosure or bankruptcy.  Banks holding substantial mortgages or mortgage backed assets must face the music and adjust their balance sheets to reflect today’s reality.  Undoubtedly this will force many banks into immediate insolvency, but such banks must be allowed to fail without receiving another nickel of taxpayer money.  Banks took the risks and made money during the bubble years; those who exercised bad judgment must now accept the consequences of their actions.

Never in American history have we needed to adopt a policy of laissez faire more desperately; never has government seemed more determined to artificially prop up an industry.  But only by allowing the housing market to clear can we hope to rebuild our shattered economy from a stable foundation.  Clearly there will be pain in the short term, but we owe it to younger Americans and future generations to allow the reemergence of a rational housing market.


  • Cmon lol, that’s just mean, there are plenty of smart individuals who disagree with us. Just because they disagree with us doesn’t mean they’re stupid.

  • right there with you on that

  • wRONg Paul can’t even read from a script without mispronouncing the names of the people whose ideas he’s parroting! He’s not even qualified to see over a piggy bank! What a fuckin’ JACKASS! lol

  • To fix what Obama has done to our Economy is going to be painful but it’s better than becoming a slave! So, GO RON PAUL because MONEY COMES and MONEY GOES but FREEDOM is Priceless!

  • No thanks, a vote for Obama is a vote for Romney. They have the same stances on the majority of social, foreign policy and economic issues, so you shut the fuck up and learn the facts.

  • Do you know what willfully ignorant means?

    It means you want to stay in the dark.
    You cannot reason or convince people who are unwilling to be educated and learn.

    Look at how many people are supporting Romney and Obama when they are clearly the same and don’t give a shit about liberty.

    Ron bet on the ability to make stupid people smart.
    and he lost.

    However you are right and Ron is right that you don’t need 51%.
    Only a third of the population overthrew the brits.

  • the whole thing is defacto

  • Listen up Ron Paul supporters!

    Here is the PAINFUL TRUTH about all of the Gary Johnson supporters lying to all of us! Ron Paul officially endorsed and supported the write in votes for his presidency in 2012!: youtube . com/watch?v=z9LqrXz3Lp4

    RON PAUL 2012!

  • I am voting Ron Paul. It’s very scary how easily the sheep around me are led so easily. They repeat what the media tells them like parrots. We are heading down the road to Greece’s fiscal nightmare affording only half of what our government actually does and the sheeple chew their cud with blissful indifference. Neither candidate is addressing the issue and will continue to spend when elected.

  • this is a computer recording-theses cock sukers killed paul!!!!!!!!!!!!

  • Urgent message to all of the Ron Paul supporters out there! Please watch this important video!: youtube . com/watch?v=53pqVL7pnJg

  • It’s time to take the training wheels off the economy.

  • Fuck Gary Johnson. I puts a smile on the politicians face when they succesfully divide the Ron Paul movement. ”Ron Paul has no chance, just vote for Gary Johnson”. And ther you have it, the votes get divded so easily this way. There can only be one true leader, and it should be Ron Paul. However, I have no American citizenship, neither have I ever been to America to be allowed to vote. Its ironic though… American election will affect the whole world. Including my nation.

  • Fuck all of you Gary Johnson supporters that hate Ron Paul and all of his supporters as well! You all deserved to be banished from human relationships!

  • Surfisher

    Amazing that the people have been bamboozled into thinking that either Barack or Mitt are a solution — when both are AGAINST these principles upon which our Nation was built!

    PRINCIPLES we must stand by!

    “A government big enough to give you everything you need, is a government big enough to take away everything that you have….” Thomas Jefferson

    “They who would give up an essential liberty for temporary security, deserve neither liberty or security” BENJAMIN FRANKLIN

    “When liberty is taken away by force it can be restored by force. When it is relinquished voluntarily by default it can never be recovered.” DOROTHY THOMPSON

    “Those who profess to favor freedom and yet depreciate agitation, are people who want crops without ploughing the ground; they want rain without thunder and lightning; they want the ocean without the roar of its many waters. The struggle may be a moral one, or it may be a physical one, or it may be both. But it must be a struggle. Power concedes nothing without a demand; it never has and it never will.” FREDERICK DOUGLAS

    “Before a standing army can rule, the people must be disarmed; as they are in almost every kingdom in Europe. The supreme power in America cannot enforce unjust laws by the sword; because the whole body of the people are armed, and constitute a force superior to any band of regular troops that can be, on any pretence, raised in the United States. A military force, at the command of Congress, can execute no laws, but such as the people perceive to be just and constitutional; for they will possess the power, and jealousy will instantly inspire the inclination, to resist the execution of a law which appears to them unjust and oppressive.” —Noah Webster, An Examination of the Leading Principles of the Federal Constitution (Philadelphia 1787).

    “All that is necessary for the triumph of evil is that good men do nothing” EDMUND BURKE

    “America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.” ABRAHAM LINCOLN

    Voting for either anti-American would be legitimizing the further government corruption that seems to have no end!

    VOTE for Garry Johnson — who stands for these principles, or face the dire consequences of failing to do so — TIME TO WAKE UP AMERICA!

  • Well, just don’t tell anyone where that is. the zombies may try to find you.

  • No, it is up to us to educate the less educated, how is that a flaw of Ron’s? Anonymous knows this stuff, Alex Jones knows this stuff. Where would anyone start if no one takes a risk? Ron took a great risk, and may welll get assisnated, so what? Our founders were only 3% initially that were willing to take on the British. They pledged their lives, their fortunes and their sacred honor.

  • Absolutely. Those who caused this crisis should have to suffer the consequences. Unfortunately they also placed themselves in the midst of America so we are the collateral damage. We needed to kick them out before this happened but we didn’t. We still allow those bankers in our communities and in our investment portfolios that represent our savings for our retirement years. Where can we all escape. Maybe we fight. Maybe naming bad hombre’s are the best solution, for their embarrassment.

  • Putting ones faith in the willingly ignorant is a flaw.

    I admire him for his efforts, but he had to have known that’s a mountain that 1 man cannot climb.

    People only deserve their liberty when they have a desire for that liberty.

    Being willingly ignorant means your choosing Tyranny…

    I feel bad for Ron Paul as it probably breaks his heart to watch a people act as sheep on line to the slaughter.

  • No politician in their right mind would not bailout banks. It would be so crushing to the economy that they’d suffer for doing so. The goal of a politician is to get and stay in power. Why would they go against their primary goal? People criticize the bailouts because criticism of the in party is a politically viable move. The same people criticizing the bailouts from the outside would have been supporting them if they were on the inside, because their political lives would depend on it.