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.


  • Everything you say to me just mirrors your own inadequacies. (See what I did there, fucky)?

    (HD) (SHOCKING) Israeli Terrorism and the Talmud
    No War for Israel in Syria and Iran !
    The Insanity of Christian Zionism!
    The Outrageous Racist Hypocrisy of Israel and World Zionism!
    Trayvon Martin Real Racism and the ZioMedia
    “Most Jews do not like to admit it, but our God is Lucifer and we are his chosen people. Lucifer is very much alive.” – Harold Wallace Rosenthal 1976.

    Sanhedrin 106a . Says Jesus’ mother was a whore: “She who was the descendant of princes and governors played the harlot with carpenters.”
    Gittin 57a. Says Jesus is in hell, being boiled in “hot excrement.”
    Yebamoth 98a. All gentile children are animals.
    Sanhedrin 57a . When a Jew murders a gentile (“Cuthean”), there will be no death penalty. What a Jew steals from a gentile he may keep.
    Read Truth About The Talmud online.

    Sanhedrin 106a . Says Jesus’ mother was a whore: “She who was the descendant of princes and governors played the harlot with carpenters.”
    Gittin 57a. Says Jesus is in hell, being boiled in “hot excrement.”
    Yebamoth 98a. All gentile children are animals.
    Sanhedrin 57a . When a Jew murders a gentile (“Cuthean”), there will be no death penalty. What a Jew steals from a gentile he may keep.
    Read Truth About The Talmud online.

  • Fellow freedom lovers, listen to the words in these videos:
    If you don’t know of Lysander Spooner, look him up and read everything he wrote. You won’t be disappointed.

  • Surfisher

    FYI — The Mormons stripped the richest man in the world, Howard Hughes, not only of his life, but his entire fortune!

    Now another Mormon could do the same to our entire Nation…if it gets elected!

    Vote for Anyone, but Mitt the American Destroyer!

    I chose to vote for Ron Paul’s Libertarian Party — Gary Johnson this time, who is on all 50 State Ballots. And should Ron Paul run again in 2016, he’s only option will be the Libertarian Ticket!!!!!

    A Vote for the Libertarian Candidate NOW, is a vote for Ron Paul later!

  • robin

    Anyone from the great state of Oregon, your write in votes will not count. According to the statutes here, Ron Paul would have to get more votes than his party challenger to be counted at the local or state level. It appears there is misinformation circulating. Contact your local elections clerk to have your state’s statute sent to you that pertains to this. So, we will be voting for Gary Johnson as a protest vote to give the Libertarian party a leg up, not because we support him personally.

    • Surfisher

      robin — Spot on!

  • never*

  • I don’t think Ron Paul supporters are bashing Johnson, I just think they don’t support him equally because he isn’t as widely known. If anyone is bashing him, then I think they are doing so under a false libertarian support banner. This is the internet. We can’t be sure that their support is true. Ever trust internet users. Period.

  • Surfisher

    Barack wants to destroy our Freedoms and our Nation — he is the evil we know!

    But, if Mitt gets into the White House — expect An American Tragedy!

    His 5 Mormon Sons are getting groomed to take over…and create a Dynasty of little Mormon Mitts for decades to come!

    Now, that is truly scary!

    Vote Gary Johnson — do not vote for the lesser of these two evils!

  • 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

    “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 — Barack the Kenyan or Mitt the Mexican Mormon — would only be legitimizing the further government corruption that seems to have no end!

    VOTE for Garry Johnson — who stands for these principles, and is on all 50 States ballots (unlike my 1st choice, Ron Paul, who is NOT on ANY States ballots) or face the dire consequences of failing to do so — TIME TO WAKE UP AMERICA!


  • Yeah. It’s craziness. Let’s bash the Libertarian candidate because he isn’t Ron Paul…. I don’t get it. Ron Paul could have had the Libertarian nomination if he wanted to, but decided against it. That was his choice. It’s not the mainstream media, or the republicans or democrats who chose Johnson, the Libertarian party chose him. They thought he’d be their best candidate, which he is. Now we have bitter Ron paul supporters bashing Gary Johnson when he is the only liberty advocate on the ballot.

  • I would bet Ron Paul would vote for President Obama. What about this storm damage? Should we pay for that? Of course. Should we not educate people born into tougher circumstances, so the next generation will not reproduce more kids that were not planned etc. Obama will listen to folks like Ron Paul and is already getting it done. Take Care and Vote for Pres. Obama if you are a Ron Paul supporter like I certainly am.

  • Not at all. But unfortunately that’s the mindset of many people. Convinced they have to choose between the lesser of two evils, or else their vote will be wasted. That line of thinking is what ensures a man like Paul or Johnson will never be in office. I was responding to PullTheTricker, who is implying that someone who supported Ron Paul, but now supports Gary Johnson, is selling out in some way, when they both have the same policies. I’m saying the sell outs are those voting Romney or Obama.

  • It is time to stop being told what to do and finish our job to elect Ron Paul in 2012! If Gary Johnson and all of his supporters tried to tell you to vote for him then tell them no we will not vote for Gary Johnson at all! We will vote for Ron Paul in 2012 instead!

    If Lisa Murkowski and all of his supporters can do it then we can all do it as well without the fear mongering tactics being used by Gary Johnson and all of his supporters to stop all of us from electing Ron Paul in 2012!

    • Steve

      I agree that most here do love ron paul and want him for the chief. However as I found out here in missouri, as a “write in” candidate a vote for ron paul will NOT be counted in any way shape or form. He did not register with the state of missouri as a write in candidate and therefore is ineligible and NONE of the votes for him will be counted. Gary Johnson is in fact on the ballot here in missouri.
      I see no other course of action but to place a vote for Gary Johnson.

  • Gary Johnson and all of his supporters do NOT believe election fraud and voter fraud at all!

    They do NOT care about this video at all called “Hacking Democracy” on YouTube!

    The Truth Hurts when they do NOT listen to Ron Paul and all of his supporters at all!

  • What are you smoking? I love Ron Paul, but in most states, you can’t write him in. Don’t vote for Gary Johnson because you like him, do it for the libertarian party. If they get over 5% of the vote, they get federal funding, and if they get over 15%, they get to participate in the next election’s debates.

    • Surfisher

      Phl3xable — Spot on!

  • Hes not running for president because we have been divided. It boggles my mind though that hes not running for president… this is just criminal. And shows the true ugly face of poli-tics.

  • Gary Johnson is always a liar when he said about Guantanamo Bay and the humanitarian wars as well! He is much worse than Barack Obama and Mitt Romney!