Sit and learn from the master
John Gaskell
mrgaskell@me.com
Sent from my iPhone
Begin forwarded message:
> From: Congresman Ron Paul
> Date: September 25, 2008 1:52:18 PM MDT
> To: mrgaskell@mac.com
> Subject: My Answer to the President
> Reply-To: Congresman_Ron_Paul_bcpag_lnavwj@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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