Ron Paul – The Revolution: A Manifesto – Page 151 through Page 156

Page 151: As more Germans rushed out to get rid of their money, prices kept getting higher and higher. The German mark lost more and more value until it became completely valueless. In the same year as the hyperinflation, 1923, Hitler made his first attempt to grab power. In November 2007, the U.S. economy experienced price increases of 3.2% or 40% annually. It isn’t impossible that a terrible inflation could occur the United States. Creating and injecting new money into the economy creates investment bubbles. In the 1990s, monetary inflation helped to create NASDAQ bubble. Trillions of dollars were lost when that bubble popped. Politicians hate when the stock market goes down but few ever blame the Federal Reserve for causing the bubble in the first place.

Quote: “Intolerance and extremism always find a readier audience in unfavorable or (as in this case) chaotic economic times.”

Page 152: The Federal Reserve, through artificially low interest rates, misleads investors on a much greater scale than analysts and financial advisers ever could. Printing more money to keep bubbles from popping only makes the eventual, inevitable downturn even more severe. The housing bubble was created by the Federal Reserve’s cheap credit policy. It printed money and gave it to the banks. With so much extra money to loan out, banks started making loans to anybody and everybody. Borrowers took the money out into the market and started to buy bigger and more expensive houses. Statistics show that the increase in mortgage debt since 2001 equals almost precisely the increase in the money supply since 2001. People started using their houses like ATMs, borrowing against the increased value of their house to go out spend.

Page 153: The recession that took place in 2001 was the only recession in history that wasn’t accompanied by a decline in housing starts. In fact, between 1998 and 2005, home prices increased by 45%. When the bubble finally burst, as it always must, people were forced to suffer dire consequences. Homeowners lost their houses due to foreclosures, personal bankruptcies abounded, and many companies went out of business. The blame must be placed where it belongs, with the Federal Reserve. It caused the bubble in the first place by injecting so much new money into the economy. Whenever the government intervenes in the economy there will be unexpected results.

Quote: “Government intervention always has unintended consequences that cause harm, a truism that applies just as strongly to interventions into the monetary system. Devastated homeowners are only the latest victims.”

Page 154: Debate on the efficacy of our monetary system must become a part of the public discourse. The issue has been ignored for far too long by politicians and public intellectuals. The Federal Reserve has convinced the public that Federal Reserve operations are far too complicated for the public to understand. We are supposed to just accept that the Federal Reserve is a necessary institution and not question whether we’d be better off without it. There is a stark lack of Federal Reserve critics pointing out its devastating effects on the economy. It is time to start taking a hard look at the Federal Reserve and coming up with ways to fix the monetary system.

Quote: “For most people, in fact, the Fed is a complete mystery, its operations incomprehensible. That seems to be just the way the Fed likes it.”

Page 155: The first step towards restoring a sound monetary system is legalizing competition in money. Americans should be allowed to use anything they wish, especially precious metals, as money. Those who prefer to use depreciating dollars as money would also be allowed to do so. There are currently many hurdles to using gold and silver as money. For example, governments at the federal and state levels charge sales and capital gains taxes on sales of precious metals. Nobody else is proposing any solutions for protecting Americans from the ravaging of the value of the dollar caused by the Federal Reserve. Apparently, almost nobody in the political arena believes it possible that an economic crises can occur which the Fed will not be able handle.

Quote: “What if economic law, which the Fed can no more defy than it can repeal the law of gravity, is about to hit the Fed and the American people like a tidal wave, before which little rate cuts here and there are like the tiny umbrella Wile E. Coyote puts over his head to protect himself from falling boulders?”

Page 156: If those who advocate sound money are wrong, allowing competition in the money market is no big deal. Neither is eliminating a few taxes on gold and silver. However, if they are right their plan provides a way for Americans to avoid a true crises. The time has come to completely reform the monetary system. The time for trivial, inconsequential changes has long since passed. Trying to cure symptoms of the problem and not the problem itself is sure to lead to failure. Printing more money cannot solve problems caused by printing too much money. Financial bubbles are not inherent to the free market system. We must start placing the blame where it belongs.


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