Transcript

Neil Cavuto: With the threat rising almost as fast as the deficit itself: two guys in Boston accused of bombing the marathon, two guys in Canada accused of trying to bomb a train headed for New York, so those are two huge issues. The government is nearly 17 trillion dollars into collective debt hole, and there’s a new push to spend more to protect us despite that hole. So how do we deal with that? Former Texas Congressman and presidential candidate Ron Paul is on the phone. Congressman, they’re already saying we need to spend more to stop this, what do you say?

Ron Paul: Oh, keep doing it, bring it on, until we have to force ourselves into reality. It’s tragic, because we’re addicted. It is like a drug addiction, you can’t get off drugs, and the economy can’t get off spending. Just look at what they’re doing at the airports now with the pretending, they’re making little cuts, and then they emphasis it and amplify it by playing politics with it. So they’ll never cut spending, the Fed is there to monetize the debt, we’re going to continue to do this until there is a true economic crisis. So I don’t think what we had in 2008 and 2009 was very much, I think it’s going to get much worse, because we’re never lived in times quite like this when the whole world was inflating their currency and everybody had a paper currency and nobody is living within their means.

Neil Cavuto: That’s one thing, Congressman, if you think about it, for the Left to say, “If in doubt, spend more”. But now, for the Right to say we need to double our spending on security, sort of like we did during the Bush-years, because our lives are at risk”. Obviously you could scare anyone into thinking, “Well, I guess it’s well worth it”, just like these privacy invasions I was discussing with your son last night, Senator Rand Paul, are justified. Because we might get killed, but what’s the harm if they’re poking into our emails and taking heat images of us. I just think you got to draw the line somewhere.

Ron Paul: Well, I do too, and I think it should be to just follow the constitution, and we shouldn’t build up this fear. Either one side says there is fear from outside so we can’t ever cut a penny from the military, and we have to expand it when we run into trouble. And the other side says we have to have a safety net for everybody, and they compromise. They always complaint so often that we don’t have then compromise in Washington, but, quite frankly, I think there’s many a compromise. And it wasn’t so bad when we were a growing country and we were so wealthy. But we’re not as wealthy as we used to be. matter of fact, we’re a debtor nation, we’re not producing as much, so, therefore, the compromise is only to continue the spending which is the wrong thing to do. They should come to the other and say, “Maybe we don’t need to be the policeman of the world, maybe we don’t have to have food stamps for 48 million people, maybe our policies are wrong, maybe Keynesian economics doesn’t work, maybe the Fed is the culprit, maybe we ought to know what the Fed is doing.

Neil Cavuto: Congressman, you raise a lot of brilliant points, as you always do, but here’s my fear. We’re bitching (pardon my French), the way we are now at these lines at airports, and blaming it on what were the tiniest of cuts in the scheme of things, and that’s creating the rage right now, with even some Republican senators saying, “Enough, maybe we have to delay these layoffs”. We will never address a fraction of the issues you are talking about.

Neil Cavuto: Well, that’s my working assumption, that it’s not going to happen. And the next question will be, “Why do you even try to change people’s mind?”, because I think it is important, I think we will have a crisis. And I’m actually encouraged because I talk to a lot of young people, they know it’s coming, and they want to hear something different. And something will have to replace it, and for that reason, there are a lot of people now assuming that there’s going to be no easy way out. We’re not going to get enough members of Congress to all of a sudden vote against the military-industrial complex and domestic welfare. No, that is well entrenched. Conservatives are military-Keynesians, because they say, “If you don’t build the F-35s, it hurts jobs”.

Neil Cavuto: Having said that, though, your son, Senator Paul, did say that to use this type of high that technology to go after bad guys is fine. He obviously doesn’t want it used recklessly on individuals, but he seemed to draw the line that to the degree you can track down bad guys, and we have that technology … I think I got the gist of what he said. What do you make of that?

Ron Paul: When the courts approve, that will be fine, but it was never meant that we would have this gigantic police force from the federal government. We had martial law out there, the FBI and all these agencies come in closing things down and going into people’s houses. No, technology is fine, but it has to be guarded. And if there’s a question, you guard liberty before you say, “Well, if we catch a bad guy, that is good”. You don’t give up liberty for 9 people because you might find one person, so I’d be very, very cautious about that. The federal government is not supposed to be our police force, yet we have over a 100,000 federal officials who carry gun to enforce these laws, and they own Boston. It’s criminal that people tolerate this so much, that we tolerate this martial law and the total acceptance that they can come into our houses and we can’t even go out of the house. What if we want to go to the store and get a loaf of bread? Oh no, you can’t do that. And yes, it was serious, there was a crisis and there were three people killed. But we have 48 murders every single day, there are a lot of murderers out there. Do we close down cities because there’re 10 murders over the weekend in Chicago? We don’t do that. But here we close down a whole city, not even allow them to go to a baseball game. I mean, I think it’s very, very scary when I look at some of those pictures of what happened up at Boston.

Neil Cavuto: Ron Paul, you make people think, thank you very much, good hearing you.

Ron Paul: Good to talk to you.

Transcript

News Anchor: Are you concerned about this drop that we’ve seen in gold?

Ron Paul: I’m concerned about the erraticness of the dollar. The dollar goes up, the dollar goes down, we print a lot of dollar and the dollar gets devalued, that’s really the concern. If people think that the gold price going up and down is a reflection of something wrong with gold, then I say no, it’s something wrong with the dollar. Because people have been expressing a concern here in these last couple of month about gold, but compared to what? Compared to where gold went from when the Fed took over when it was $20/ounce, compared to what has happened in the past?

News Anchor: We have to talk about the stability here, to see the sharpest drop of gold in 30 years actually makes the dollar’s price activity recently look a little bit stable?

Ron Paul: Well, in a relative sense, that might be the case, but that’s the way markets work. I remember in the 1970s, when they finally allowed people to own gold, it went from $35/ounce up to $200/ounce rather rapidly, and then it lost 50%, and then it went up to $800/ounce. So to compare a couple of months or a couple of weeks and forget about a bull-market in the gold prices in relation to the dollar for 12 years, I would say the comparison is not an authentic comparison. What you have to look at is the inflation, inflation is when they increase the supply of money. And since 2008, they have quadrupled the supply of Federal Reserve credit, and they’re buying 85 billion dollars a month of treasury bills. And at the same time last week, they bought 60 billion dollars, that’s the inflation, that’s the distortion of the market, and that’s why we’re not getting economic growth.

News Anchor: We’re seeing the opposite of inflation right now.

Ron Paul: It depends on how you define it, inflation is when you increase the supply of money. Bond prices are going up, stocks are going up, housing prices are starting to go back up again, education costs are going up. But the gross distortion is the affect that the inflation of the money does on the price of money and the interest rates and how it causes economy problems and why you don’t get economic growth. So you have to look at the mal-investment and the destruction that occurs when you mess around with the price of money. So it’s not just the CPI, because the CPI isn’t reliable, the government fudges that as well, they change the way they measure it. The free market economists say the CPI is going up by about 8%, so there’s a lot of deception going on out there. And just talk to somebody on retirement getting Social Security, they are not happy with the purchasing power of the dollar, and you can’t tell them there’s no inflation.

News Anchor: Dr. Paul, let’s go back to gold for a moment. Talking about the prices, price stability helps to build confidence, confidence in paper money, and certainly confidence in hard assets. With all the speculative money that went into gold on the way up, and came out of gold on the recent plunge, how do you know what the real value of gold is?

Ron Paul: Nobody knows that, other than what is happening at that moment, because the supply and demand of gold is very important, that’s why it is money, because gold is used elsewhere and it is a commodity. But the supply and demand of money paper is the culprit, that’s the one that is causing all the trouble, but people ignore the supply and demand of paper money. Yes, paper money goes up and paper money goes down, but look at the long term purchasing power of the dollar, it’s been devastating. And believe me, at the rate they’re printing the money, you’re going to see a continual devastation of the value of the dollar, and you’re not going to see economic growth until you liquidate the debt and liquidate the mal-investment out there. Sure, you’re going to see housing go back up again, but you’re going to see more bubble-formation. Just because prices go up, that doesn’t mean there’s economic growth. So we’re a long way from the correction, mainly because they ignore the definition of inflation, and they ignore the need to liquidate debt and the need to liquidate and get rid of all the mal-investment. And by just watching the stock market … one good comparison would be to look at the price of stocks in gold. Although in the last couple of weeks it’s changed a bit, the stock market has crashed because you used to be able to buy the Dow with 44 ounces of gold, now it’s under 10 ounces of gold, and it’s probably going to go a lot lower.

News Anchor: Dr. Paul, how can we talk about the risk of a correction in financial assets – that’s what you were just discussing, the likelihood that the Fed may be creating a bubble for quantitative easing with low interest rates and priming the markets for a crash – when we’ve just seen something similar happen in gold. There was a correction in the gold price. We’re pressing you on this issue because we need you to reconcile the two, you see the characteristics, the [dual plan] of financial assets playing themselves out in hard assets, and it’s tough to understand. We want you to share your views with us.

Ron Paul: I think the way gold’s acting acts like a market does: you get ahead of yourself, and there has to be a correction. The amazing thing isn’t the correction, the amazing thing is the biggest bull-market of the century, when one commodity went up for 12 years straight. So you can’t ignore that. But to say there has to be an adjustment because prices are subjectively decided by many, many factors, so you can’t predict exactly where this money is going to go. Unfortunately, the money right now that the Fed creates goes into reserves, further distorting the market, further pumping up the prices of bonds, further building up a bubble that will burst, because our economic growth isn’t there and we’re in every bit as much trouble as Europe or Greece, so someday there will be a lack of confidence in our dollar, and then you’re going to see the correction in the paper a lot more severe than you see the correction in the dollar-gold ratio.

News Anchor: I’m curious, you don’t like the dollar, you don’t like Federal Reserve and other paper fiat currencies, what do you think about bitcoin, the virtual currency, that’s not backed by the governments or central banks?

Ron Paul: To tell you the truth, it’s a little bit too complicated. If it’s complicated to understand, and I’ve been studying the money for a long time, if I can’t put it in my pocket, I’d have some reservations about that. But it’s been designed in the free market, and if it’s a means of exchange, it would not ever be illegal, and you should not regulate it in the free market. But I don’t think it fits the definition of money which has been around for about 6,000 years. People want to see something that they can know what it is, they can define it, they can touch it, and they can put it in their pocket. And with the bitcoin, if you don’t have a computer, and somebody running the computer and the calculations, you don’t have it. So I am not a big supporter of that, but I’m not opposed it, and I admit I don’t fully understand exactly what’s going on.

News Anchor: So you’re sticking to the hard stuff. I’m just wondering if you’re looking at this price drop in gold as a buying opportunity. I know you also have your own portfolio of gold.

Ron Paul: Oh yes, this is the time people buy. If you look at it these last few weeks, there were some pictures in the paper that were astounding. I think it was in Thailand or someplace, it was a jewelry gold shop, and they were lined up 6 rows deep, hundreds and hundreds of people buying. They were running out of silver coins right now. I recently brought two, because I don’t like to buy when there’s a lot of energy with pushing them up, I wanted to see a correction. And this is very healthy for the economy, because the speculators, the people who are in it and are trading from minute to minute, are weak holders of gold. They don’t believe in gold, but they believe in helping to set the market, and they have a function to play. But the people who really believe in it, are buying now, and literally it was the commodities market that shook this thing out, it wasn’t in the hard assets. There was one person that dumped 53,000 contracts in one sale, so there’s some finagling going on there, I believe.

News Anchor: Yes, the speculative flair. Well, Dr. Paul, you are a believer, always opinionative, I want you to stay with us from Clute, Texas today for your thoughts on a potential historic fix on our nation’s immigration laws and gun control on Market Makers on Bloomberg Television. We’ll be back in a few minutes.

In Washington right now, there is an intense renewed debate about a proposed overhaul of our nation’s immigration system. After the Boston Marathon bombings, in which the suspects were Chechen immigrants, some members of Congress say a proposed legislation needs another look. Ron Paul is back with us here on Market Makers, he’s the former Congressman from Texas and presidential hopeful. Do you think, Dr. Paul, this tragedy is an opportunity to fix our immigration system?

Dr. Paul: Well, there’s always an opportunity because there’s a need for it, but I don’t think they’re going to solve any problems at all, because they’re too big and they’re very complicated and they’re very much involved with economics. I don’t think you can deal with immigration unless you deal with the welfare state: both, with the incentive for some people here not to work, and an incentive for others to come and get some free services. And also I think it is more important that we look at our work permit for letting people come and work, and put aside this idea of how we’re going to give automatic citizenship. That becomes a political football, because everybody is lining up for who’s going to get the vote, one side says, “We’re going to get all the votes because we want them all to be legalized”. But I think you have to deal with the economic policy and really open up the opportunities for people to come back and forth and to work, but not to insist that everybody is going to become a citizen because I don’t think that’s going to work under these circumstances.

News Anchor: Dr. Paul, I want to ask you about what’s happening in the GOP right now. Your son, Rand Paul, the senator from Kentucky, made himself even more famous than he already was with that fantastic filibuster, which was impressive at the very least, over the issue of drones. He has an opportunity to galvanize the Republican Party. But the old guard, with the help of people like Karl Rove, appears to be circling the wagons and try to keep the Tea Party up. Hows it going to end?

Ron Paul: Well, with a weakened Republican Party. Because we did fairly well in the presidential campaign, we had a lot of delegates, and they were excluded from the convention, and the rules have been written so it makes it even worse for anybody to challenge the status quo. The people who have been in charge don’t want their party to be broken up. So when the young people come in, they resist it. And it was the young people that were supporting me and my campaign to the tune of millions. People were very interested, but Republicans don’t come and ask me how we can get the young people interested, because I’d want them to change foreign policy, I’d want them to change economic policy, I’d want them to balance the budget, and I’d want them to talk about the Fed. And the establishment in both parties aren’t interested in talking about any of those issues, the young people are.

News Anchor: But if there’s no solidarity inside the Republican Party, Dr. Paul, how on earth does it win the next election?

Ron Paul: I think the solidarity is the same problem in the Democratic Party and the Republican Party, it’s ongoing, there are always factions. And, of course, I want to unify everybody into believing in the cause of liberty, sound money, balanced budget, and the constitution. So I would say, yes, that’s a good way to unify them, but to unify for the sake of unity makes no sense whatsoever. Why should everybody give up on their beliefs? But yes, the old guard are losing their way, the party is getting smaller, it is splintered, and they will have to face up to the fact that if they talk about limited government and personal liberties, they have to actually believe in it and do something about it, because the young people won’t be fooled, and if this continues, the party will become smaller.

News Anchor: So, quickly, do you think your son should run for President in 2016, as he has perhaps hinted?

Ron Paul: You’ll have to ask him, I have no idea what he wants to do.

by Ron Paul

As the year draws to an end, America faces yet another Congressionally-manufactured crisis which will likely end in yet another 11^th hour compromise, resulting in more government growth touted as “saving” the economy.  While cutting taxes is always a good idea, setting up a ticking time bomb with a sunset provision, as the Bush tax cuts did, is terrible policy.  Congress should have just cut taxes.  But instead, we have a crisis that is sure not to go to waste.

The hysteria surrounding the January 1 deadline for the Budget Control Act’s spending cuts and expiration of the Bush tax cuts seems all too familiar.  Even the language is predictably hysterical: if government reduces planned spending increases by even a tiny amount, the economy will go over a “fiscal cliff.”  This is nonsense.

This rhetoric is based on the belief that government spending sustains the economy, when in fact the opposite is true.  Every dollar the government spends is a dollar taken from consumers, businessmen, or investors. Reducing spending can only help the economy by putting money back in the hands of ordinary Americans.  Politicians who claim to support the free market and the lower and middle-class should take this to heart.

The reality is, however, that neither Republicans nor Democrats are serious about cutting spending. Even though U.S. military spending is exponentially larger than any other country and is notorious for its inefficiency and cost overruns, Republicans cannot seem to stomach even one penny of cuts to the Pentagon’s budget.  This is unfortunate because this is the easiest, most obvious place to start getting spending under control.  The military-industrial complex and unconstitutional overseas military interventions should be the first place we look for budget cuts.

Similarly, Democrats are digging in their heels on not cutting any welfare or entitlement spending and instead propose to fix the deficit by raising taxes on the rich, even though the U.S. Government already has a progressive tax code and the rich already pay more than their fair share. Furthermore, these higher taxes would fall on small business owners, investors, and entrepreneurs—in other words, the source of economic growth and new jobs!

The truth is that there is no excuse for government spending being as high as it is, nor for taxes being as high as they are.  Even the God of the Old Testament only asked for 10% as a tithe and offering, and Americans revolted against the King of England for taxes that amounted to less than five percent.  Yet so many people today complain about “loopholes” for the rich that lower their actual tax rate to “only” 13% in some instances.  Even that is a criminal amount to pay for a wasteful, abusive, unconstitutional government.

We are indeed headed to a fiscal cliff and have been long before this latest hysteria cropped up.  But it is not cuts to spending or reduced government “revenue” that will send us over the cliff, it is continued government spending that will.  Until the federal government limits itself to its Constitutionally-mandated role, spending and taxation will remain out of control.

Look for a “bipartisan” compromise in late December, with Republicans giving in to tax increases and settling for phony spending cuts that actually grow government, and Democrats caving on defense cuts in exchange for tax increases.  This is how the government has always grown: both sides will sacrifice their pro-liberty, small government stances in certain areas in order to grow the government where they prefer.

Liberty always loses in the 11^th hour.

by Ron Paul

As the northeastern United States continues to recover from Hurricane Sandy, we hear the usual outcry against individuals and companies who dare to charge market prices for goods such as gasoline. The normal market response of rising prices in the wake of a natural disaster and resulting supply disruptions is redefined as “price gouging.” The government claims that price gouging is the charging of ruinous or exploitative prices for goods in short supply in the wake of a disaster and is a heinous crime. But does this reflect economic reality, or merely political posturing to capitalize on raw emotions?

In the wake of Hurricane Sandy, the supply of gasoline was greatly disrupted. Many gas stations were unable to pump gas due to a lack of electricity, thus greatly reducing the supply.  At the same time demand for gasoline spiked due to the widespread use of generators. Because gas stations were forbidden from raising their prices to meet the increased demand, miles-long lines developed and stations were forced to start limiting the amount of gasoline that individuals could purchase. New Jersey gas stations began to look like Soviet grocery stores.

Had gas stations been allowed to raise their prices to reflect the increased demand for gasoline, only those most in need of gasoline would have purchased gas, while everyone would have economized on their existing supply. But because prices remained lower than they should have been, no one sought to conserve gas.  Low prices signaled that gas was in abundant supply, while reality was exactly the opposite, and only those fortunate enough to be at the front of gas lines were able to purchase gas before it sold out.  Not surprisingly, a thriving black market developed, with gas offered for up to $20 per gallon.

With price controls in effect, supply shortages were exacerbated.  If prices had been allowed to increase to market levels, the profit opportunity would have brought in new supplies from outside the region.  As supplies increased, prices gradually would have decreased as supply and demand returned to equilibrium. But with price controls in effect, what company would want to deal with the hassle of shipping gas to a disaster-stricken area with downed power lines and flooded highways when the same profit could be made elsewhere?  So instead of gas shipments flooding into the disaster zones, what little gas supply is left is rapidly sold and consumed.

Governments fail to understand that prices are not just random numbers. Prices perform an important role in providing information, coordinating supply and demand, and enabling economic calculation. When government interferes with the price mechanism, economic calamity ensues. Price controls on gasoline led to the infamous gas lines of the 1970s, yet politicians today repeat those same failed mistakes. Instituting price caps at a below-market price will always lead to shortages. No act of any legislature can reverse the laws of supply and demand.

History shows us that the quickest path to economic recovery is to abolish all price controls. If governments really want to aid recovery, they would abolish their “price-gouging” legislation and allow the free market to function.

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.

Ron Paul

Last week, supporters of the current administration rejoiced over job numbers released by the Bureau of Labor and Statistics (BLS). For the first time since the administration came to power, the official unemployment number fell below 8%. Keynesian cheerleaders all claimed the numbers meant we are surely on the road to economic recovery, just in time for Christmas, and also, the election. Others saw through this ruse.

The situation on the ground looks nothing like a recovery. 23 million people are still out of work or chronically underemployed. This number is expected to rise dramatically next year. The situation in Washington should not give anyone cause for optimism. Politicians refuse to look honestly and intelligently at the cause of our economic malaise, and so real solutions are not taken seriously or acted upon. It is much easier and less painful to simply recalculate the numbers and redefine the terms until a rosier picture is presented. There is only blind hope that at some point, for some reason, things might change. But nothing will change for the better if we only stay the course.

The truth is the long term solutions to our economic quagmire involve some short term pain. Re-evaluating the economic role of an institution as insidious and behemoth as the Federal Reserve will inconvenience some people, and those people happen to have a lot of power. Similarly, the idea of ending government programs and closing down superfluous departments will always upset someone because it means someone will stop getting a government check.

No one wants to upset the apple cart, even if all the apples are rotten.

Not all of the unemployed are counted in the BLS unemployment numbers. This is no secret. In 1994 government statisticians came up with the term “discouraged worker” to remove entire swaths of people from the unemployment statistic. Now all the government has to do to improve the unemployment numbers is discourage people from looking for a job.

Far more unintended consequences are created in Washington than jobs.

Ideally, the business sector should be able to depend on sound numbers from the BLS, but smart business leaders know that trust in these numbers leads to bad decisions and failure. In regards to the recent jobs numbers, investor Jim Rogers recently stated “I have learned not to take advice from the government, especially the US government, which frequently misleads its citizens.” He also noted the election just around the corner, suggesting timing as an extra incentive to keep fudging the statistics.

The real drivers of the productive economy can’t afford to take risks based on false numbers. This is why economist John Williams created Shadow Government Statistics, utilizing more traditional methodologies and definitions to show business decision makers the real economic picture, warts and all. He shows the real unemployment rate to be a staggering 22.8%.

This is a difficult figure to accept as the actual truth. Perhaps if the politicians did, the people would finally demand real change and real solutions. Perhaps they would consider that all of the so-called stimulus spending, quantitative easing and mountains of regulation from Washington has only crippled the economy. Perhaps people would come to understand that fewer checks handed out from the public sector would mean more checks available in the private sector, and a return to real prosperity instead of just the appearance of it.

Senator Jeff Sessions, ranking member of the Senate Budget Committee has pointed out that our per capita government debt is already larger than Greece’s. Per person, our government owes over $49,000 compared to $38,937 per Greek citizen. Our debt has just reached 101% of our Gross Domestic Product. Our creditors see this and have quietly slowed down or stopped their lending to us. As a result, the Federal Reserve has been outright monetizing debt as a way to patch things together and keep the economy on life support a little longer. There is rapidly shrinking demand for our debt, and confidence in the dollar is falling. This phenomenon is hidden only by the fact that confidence in all other fiat currencies is falling faster.

None of this seems to really alarm the administration, obviously, as they have just released a budget that accelerates spending and borrowing. The reason the debt and deficits plague the economy, according to this administration, is that the American economy is not taxed enough. Therefore, hidden in the fine print of the budget is a provision that ramps up the corporate dividends tax rate from its current 15% to 39.6%. In addition, certain deductions and exemptions will be phased out; an additional 3.8% Obamacare investment tax surcharge will be tacked on, bringing the effective dividend tax rate to 44.8% in 2013. Keep in mind, this is not just a tax on big business, this is a tax on anyone who depends on dividend income to live – retirees will be hit hard by these changes and dividend yielding stock prices will adjust downward rapidly to reflect their decreased value.

Not only this, but the Obama administration is worsening the uniquely American policy of taxing income of US based companies earned overseas. No other country presumes to tax globally in this manner, so it amounts to a huge penalty for basing a company in the US. Companies have been able to manage this penalty by deferring taxation until it is repatriated or by paying dividends. What will happen to US based businesses with strong international ties if these allowances are abolished as the Obama administration proposes? A massive wave of permanent capital flight will undoubtedly cause the already high levels of unemployment to rise.

Businesses are struggling and failing in this economy. The government ultimately depends on a healthy business climate to provide jobs and a tax base. It is penny wise and pound foolish to add to business tax burden in a misguided attempt to close the colossal gap between our government’s revenue and spending. Rather than crippling and absorbing more of our shrinking economy, government needs to be drastically cut – not in 10 years, but immediately.

Those who understand the underpinnings of the dollar and how the Federal Reserve works have known for some time that we are on an unsustainable course, that major chaos is in store if nothing is done quickly to reform things. Politicians pay lip-service to reforms that never materialize or turn out to be at best small and meaningless, or at worst actively harmful. It seems more and more inevitable that because the necessary changes would be too inconvenient for the elites to enact now, we will get them later Greek-style, through collapse and chaos.