[ExI] Fwd: My Answer to the President (from Ron Paul)

[Samantha Atkins]

Begin forwarded message:

> From: Congresman Ron Paul <updates08 at ronpaulforcongress.com>
> Date: September 25, 2008 12:52:18 PM PDT
> To: sjatkins at mac.com
> Subject: My Answer to the President
> Reply-To: Congresman_Ron_Paul_bcpag_lnaqfb at cp20.com
>
> Dear Friends:
>
> The financial meltdown the economists of the Austrian School  
> predicted has arrived.
>
> We are in this crisis because of an excess of artificially created  
> credit at the hands of the Federal Reserve System. The solution  
> being proposed? More artificial credit by the Federal Reserve. No  
> liquidation of bad debt and malinvestment is to be allowed. By doing  
> more of the same, we will only continue and intensify the  
> distortions in our economy - all the capital misallocation, all the  
> malinvestment - and prevent the market's attempt to re-establish  
> rational pricing of houses and other assets.
>
> Last night the president addressed the nation about the financial  
> crisis. There is no point in going through his remarks line by line,  
> since I'd only be repeating what I've been saying over and over -  
> not just for the past several days, but for years and even decades.
>
> Still, at least a few observations are necessary.
>
> The president assures us that his administration "is working with  
> Congress to address the root cause behind much of the instability in  
> our markets." Care to take a guess at whether the Federal Reserve  
> and its money creation spree were even mentioned?
>
> We are told that "low interest rates" led to excessive borrowing,  
> but we are not told how these low interest rates came about. They  
> were a deliberate policy of the Federal Reserve. As always,  
> artificially low interest rates distort the market. Entrepreneurs  
> engage in malinvestments - investments that do not make sense in  
> light of current resource availability, that occur in more  
> temporally remote stages of the capital structure than the pattern  
> of consumer demand can support, and that would not have been made at  
> all if the interest rate had been permitted to tell the truth  
> instead of being toyed with by the Fed.
>
> Not a word about any of that, of course, because Americans might  
> then discover how the great wise men in Washington caused this great  
> debacle. Better to keep scapegoating the mortgage industry or  
> "wildcat capitalism" (as if we actually have a pure free market!).
>
> Speaking about Fannie Mae and Freddie Mac, the president said:  
> "Because these companies were chartered by Congress, many believed  
> they were guaranteed by the federal government. This allowed them to  
> borrow enormous sums of money, fuel the market for questionable  
> investments, and put our financial system at risk."
>
> Doesn't that prove the foolishness of chartering Fannie and Freddie  
> in the first place? Doesn't that suggest that maybe, just maybe,  
> government may have contributed to this mess? And of course, by  
> bailing out Fannie and Freddie, hasn't the federal government shown  
> that the "many" who "believed they were guaranteed by the federal  
> government" were in fact correct?
>
> Then come the scare tactics. If we don't give dictatorial powers to  
> the Treasury Secretary "the stock market would drop even more, which  
> would reduce the value of your retirement account. The value of your  
> home could plummet." Left unsaid, naturally, is that with the  
> bailout and all the money and credit that must be produced out of  
> thin air to fund it, the value of your retirement account will drop  
> anyway, because the value of the dollar will suffer a precipitous  
> decline. As for home prices, they are obviously much too high, and  
> supply and demand cannot equilibrate if government insists on  
> propping them up.
>
> It's the same destructive strategy that government tried during the  
> Great Depression: prop up prices at all costs. The Depression went  
> on for over a decade. On the other hand, when liquidation was  
> allowed to occur in the equally devastating downturn of 1921, the  
> economy recovered within less than a year.
>
> The president also tells us that Senators McCain and Obama will join  
> him at the White House today in order to figure out how to get the  
> bipartisan bailout passed. The two senators would do their country  
> much more good if they stayed on the campaign trail debating who the  
> bigger celebrity is, or whatever it is that occupies their attention  
> these days.
>
> F.A. Hayek won the Nobel Prize for showing how central banks'  
> manipulation of interest rates creates the boom-bust cycle with  
> which we are sadly familiar. In 1932, in the depths of the Great  
> Depression, he described the foolish policies being pursued in his  
> day - and which are being proposed, just as destructively, in our own:
>
> Instead of furthering the inevitable liquidation of the  
> maladjustments brought about by the boom during the last three  
> years, all conceivable means have been used to prevent that  
> readjustment from taking place; and one of these means, which has  
> been repeatedly tried though without success, from the earliest to  
> the most recent stages of depression, has been this deliberate  
> policy of credit expansion.
>
> To combat the depression by a forced credit expansion is to attempt  
> to cure the evil by the very means which brought it about; because  
> we are suffering from a misdirection of production, we want to  
> create further misdirection - a procedure that can only lead to a  
> much more severe crisis as soon as the credit expansion comes to an  
> end... It is probably to this experiment, together with the attempts  
> to prevent liquidation once the crisis had come, that we owe the  
> exceptional severity and duration of the depression.
>
> The only thing we learn from history, I am afraid, is that we do not  
> learn from history.
>
> The very people who have spent the past several years assuring us  
> that the economy is fundamentally sound, and who themselves  
> foolishly cheered the extension of all these novel kinds of  
> mortgages, are the ones who now claim to be the experts who will  
> restore prosperity! Just how spectacularly wrong, how utterly  
> without a clue, does someone have to be before his expert status is  
> called into question?
>
> Oh, and did you notice that the bailout is now being called a  
> "rescue plan"? I guess "bailout" wasn't sitting too well with the  
> American people.
>
> The very people who with somber faces tell us of their deep concern  
> for the spread of democracy around the world are the ones most  
> insistent on forcing a bill through Congress that the American  
> people overwhelmingly oppose. The very fact that some of you seem to  
> think you're supposed to have a voice in all this actually seems to  
> annoy them.
>
> I continue to urge you to contact your representatives and give them  
> a piece of your mind. I myself am doing everything I can to promote  
> the correct point of view on the crisis. Be sure also to educate  
> yourselves on these subjects - the Campaign for Liberty blog is an  
> excellent place to start. Read the posts, ask questions in the  
> comment section, and learn.
>
> H.G. Wells once said that civilization was in a race between  
> education and catastrophe. Let us learn the truth and spread it as  
> far and wide as our circumstances allow. For the truth is the  
> greatest weapon we have.
>
> In liberty,
>
>
>
> Ron Paul
>
>
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>
>
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