A Nation on the Verge of Bankruptcy

by Ron Paul

It has been long understood that our federal government is going deeper into debt, consistently raising the debt ceiling and demonstrating no fiscal restraint. In recent years, debt ceiling increases have been placed in “must pass” legislation as a means to guarantee that Republicans as well as Democrats would vote for them when Congress was under Republican control.

We also know our nation’s “negative savings rate” reflects the habits of private citizens, showing those habits to be not tremendously different than the habits of the public sector. Yet, the signs of decline are becoming ever more apparent. So apparent, in fact, that it seems unlikely that bailouts or other gimmicks will have even short term success. More inflation, and creating moral hazard by bailing out egregious offenders, is a recipe for disaster. These activities can seem to provide some short term relief, but it seems we are now at a significant crisis point, where monetary policy gimmicks don’t provide the band-aids they did in the past.

Not only is our nation on the verge of bankruptcy, but so are its people and private institutions. We are now repeatedly hearing about businesses “needing to access the credit market to make payroll.” This is an unmistakable sign of more dire consequences ahead for the economy. If businesses must borrow just to make payroll, this is evidence of a severe undercapitalization that cannot be sustained, even for the short run.

Couple these facts with items such as the explosion of the “pay day loan” industry and the unmasking of the false sense of economic well-being is nearly complete. These pay day loan companies use preferred access to easy credit to inject cash into the hands of the working poor. They are nearly always set up in lower-income neighborhoods. These people, who are struggling to buy food and pay rent, get addicted to the credit drug. Their standard of living is only further depressed by the interest payments on these loans that make them profitable to their providers. Thus, the recipients are left even less capable of paying for items such as food and housing in the long run, without using this credit again and again.

These people are often the very ones being paid by businesses who “borrow to make payroll.” This is the dark underbelly of the fiat money, borrow and spend economy this nation has been building. As the government takes over more and more functions of the economy many see the rise of socialism as an antidote to this failure of “capitalism”. However, the fact remains that our economy has been increasingly running on debt, not capital. Capitalism does not exist without capital and debt is not, has never been and will never be a form of capital. Only now are we seeing the more dire implications of an economy without capital.


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  • Edwin

    I have a question. Why should they approve to bailout the auto industry? At one time, years back the auto industry produce an all electric are that would have clearly saved the hard working consumer lots of money. Instead they stopped making the electric car and recalled the electric cars so that no one could own them. So why should we bail them out and leave our future with so much debit?

  • Teri

    People are voting away their Rights to Freedom!

    What will the economy even matter, if you have no freedom?!

    Please help to save our liberties, our Rights of Freedom in the Consstitution!

    VOTE for Liberty, Opportunity, & Freedom, NOT for the person who does not beieve in these things, and NOT for the person who will not stand a chance to voice any assistance to save these things at all right now!!!

    FIRST – We must save our country!

    SECOND – We can re-group & re-educate ‘the party’ IF we survive not seeing Barack Obama elected!!!

  • Bill

    I totally agree with Dr. Paul’s solution for our economic crisis. People are being educated like never before by Dr. Paul on many of these national issues. I think he is gaining more new support.  (CNN American Morning), It is not enough, but nice to see the national media outlets interviewing him and posturing him as a trusted consultant.   On the other issues he supports, I do know that people I knew liked him, but were scared away with Dr. Paul’s ideas that many departments of the government need to be eliminated such as Education and the IRS.  I dont recall ever hearing a “step-by-step” plan of what will result from this or the advantage to this on a national stage.  I support Dr. Paul, but as one coming into this fairly recently, I think it would attract more new people if those ideas were clearly discussed on a national stage, as Dr. Paul is becoming more of a household name. These are big steps for many people to consider, and it needs to be explained in more detail to the American people in my view.  This is not by any means a discredit to Ron Paul.

  • Sophie

    Can you please date this article so we know when Dr. Paul wrote this? And source it? Thank you!

  • Matt

    @J. Pumpkin

    I believe it’s more of a case of the people working in the Treasury and Federal Reserve trying to please the administration by saying it’s “all okay” when, in reality, we are in a lot of trouble.

    They knew this was coming back in Spring and of course we weren’t made aware.

    Bernanke likes to call himself an expert on the Depression, so I suppose he just assumed there was no way to stop it (if he even thought about it or realized what was happening).

  • J. Pumpkin

    Does anyone else feel as if this is being done on purpose? It’s almost as if the administration wants the dollar to fail.

  • jesper k

    Let’s call it the failure of Debtalism!
    A new word is clearly needed to cover this monetary fiasco.

  • Gflynn

    How have we let it get to the point where none of the candidates can discuss exactly what Ron Paul is saying? I am way more pessimistic than Mr. Paul himself because he believes that the American people seem to know what is “really” going on and that it’s just a matter of time before they wake up.

    I’m sorry but one looke at this campaign will tell you this country is so far removed from reality that nothing short of a miracle could turn it around. Our problem is cultural, not political! When our society continues falling for the same crap over and over again it is they that need to be blamed for demanding nothing more than sound bites and talking points.

    The mantra right now is that “Wall St.” is to blame and that they are encroaching on the only place left with values- “Main St.”. Please, Main St. is more culpable in all of this! at least we have always known that Wall St. was the place for money grubbing bastards. At least there was a sense of honesty in that. Main st. is the place where people drove around in monster trucks that were parked in their McMansion driveways which were paid for by funny money. And they knew darn well what they were doing!

    All these deluded Republicon’s bellowing out “free market” baloney without any clue that there is no such thing as a free market in a fiat economy! I am truely getting sick to my stomache! Mr. Paul, keep speaking there are plenty of us out here that really admire what you are doing!

  • Proud_Ronulan

    Hey there’s a new website out that got motivated by the Bailout. See if you can give them some thought provoking commentary. I’m going to go hit ’em up right now.



  • colin syme

    l have been collecting articles of interest which l file(l have been doing this since the 60s) formerly from newspapers, now the internet. this blog will be printed and added to my collection as l believe it just about sums up the situation at the moment,—a future historical document?