Listen to Ron Paul
Mark Anderson
March 18, 2009
It was rather refreshing to watch Congressman Ron Paul in his questioning of former Fed Chairman Paul Volcker. The point that Congressman Paul was trying to make - a warning that I have been making for years - is that the post-Bretton Woods fiat dollar standard is over. It's gone. It's done. I hate to spoil the party, but there will be no economic recovery with the present system, and anything other than a radical change - i.e., returning to sound money - isn't a solution.
The signal the market is sending is that the rest of the world doesn't have the savings - i.e., can't supply the U.S. with the credit - necessary to finance our consumption. In other words, the dollar can no longer buy on the international market what it once could. And why are we dependent upon infusions of foreign credit to begin with? Because of inflation, which - contrary to what Ben Bernanke said several months ago (In the last half of that video, you can see Bernanke actually say that money printing only affects the prices of imports, which David Hume refuted in 1752. I have refuted that as well, both here and here.) - drives up the cost of capital, thus fueling dependency upon cheaper foreign markets to supply us with savings, i.e., real wealth.
The most discouraging thing about the exchange between Congressman Paul and Chairman Volcker is that it was probably a flop. Congressman Paul wasn't trying to discover that the dollar standard is over so much as he was trying to put on an exhibition for the consumption of his colleagues. In other words: he wanted his colleagues to understand that the dollar standard is over, and the Congress must get its act together. For one reason or another, the others didn't seem to mentally process this message.
The United States government, the biggest sub-prime borrower in the world, is bankrupt. Without artificially low interest rates and cheap credit, its jig is up. If the market were allowed to function, the way it needs to, interest rates would rise and the insolvency of the government would be exposed outright. Good riddance. The problem with the Soviet government collapsing wasn't that it collapsed, but that it collapsed because it collapsed the economy. No doubt, our economy, too, will collapse as the politicians scramble to save socialism and hold onto power. In order for the recovery to begin, the welfare-warfare-police state has to collapse. Unfortunately, very few politicians understand, much less care about, the present situation we are in. Instead, they go along with fantasies to justify the spending orgy and holding onto power. As a result, the dollar's fate has been sealed, and the demise will be that much more chaotic.
We need market-cleansing bank runs. The money supply should be contracting faster than capital. Instead, politicians keep doing the same thing, only with more intensity. We are burning through what remains of capital and savings, i.e., living through a slow-motion run on real wealth. When store inventories are exhausted and the retail sector is finished off, that is when it will become self-evident that the dollar is bankrupt. You will see a sudden and rapid exit from the dollar, and Washington's game will be over. The dollar is already bankrupt. Most people just have yet to figure this out, but eventually the market will.
At this stage, consumption that isn't paid for with production will only inflict more damage. We can't continue to pay for things with inflation, and there is nothing any central planner can do to stimulate economic growth. Politicians that advocate more government spending should be in jail. Since politicians in Washington will dependably do the inverse of the right thing, Americans need to start extricating themselves from the present arrangement. Put yourself onto a gold and/or silver standard. We need to tell Washington to leave us alone. States should secede from the union and return to using sound money. Until we are back to using sound money, the price mechanism will not work, the market won't be able to discover real prices, and there will be no economic recovery.
The signal the market is sending is that the rest of the world doesn't have the savings - i.e., can't supply the U.S. with the credit - necessary to finance our consumption. In other words, the dollar can no longer buy on the international market what it once could. And why are we dependent upon infusions of foreign credit to begin with? Because of inflation, which - contrary to what Ben Bernanke said several months ago (In the last half of that video, you can see Bernanke actually say that money printing only affects the prices of imports, which David Hume refuted in 1752. I have refuted that as well, both here and here.) - drives up the cost of capital, thus fueling dependency upon cheaper foreign markets to supply us with savings, i.e., real wealth.
The most discouraging thing about the exchange between Congressman Paul and Chairman Volcker is that it was probably a flop. Congressman Paul wasn't trying to discover that the dollar standard is over so much as he was trying to put on an exhibition for the consumption of his colleagues. In other words: he wanted his colleagues to understand that the dollar standard is over, and the Congress must get its act together. For one reason or another, the others didn't seem to mentally process this message.
The United States government, the biggest sub-prime borrower in the world, is bankrupt. Without artificially low interest rates and cheap credit, its jig is up. If the market were allowed to function, the way it needs to, interest rates would rise and the insolvency of the government would be exposed outright. Good riddance. The problem with the Soviet government collapsing wasn't that it collapsed, but that it collapsed because it collapsed the economy. No doubt, our economy, too, will collapse as the politicians scramble to save socialism and hold onto power. In order for the recovery to begin, the welfare-warfare-police state has to collapse. Unfortunately, very few politicians understand, much less care about, the present situation we are in. Instead, they go along with fantasies to justify the spending orgy and holding onto power. As a result, the dollar's fate has been sealed, and the demise will be that much more chaotic.
We need market-cleansing bank runs. The money supply should be contracting faster than capital. Instead, politicians keep doing the same thing, only with more intensity. We are burning through what remains of capital and savings, i.e., living through a slow-motion run on real wealth. When store inventories are exhausted and the retail sector is finished off, that is when it will become self-evident that the dollar is bankrupt. You will see a sudden and rapid exit from the dollar, and Washington's game will be over. The dollar is already bankrupt. Most people just have yet to figure this out, but eventually the market will.
At this stage, consumption that isn't paid for with production will only inflict more damage. We can't continue to pay for things with inflation, and there is nothing any central planner can do to stimulate economic growth. Politicians that advocate more government spending should be in jail. Since politicians in Washington will dependably do the inverse of the right thing, Americans need to start extricating themselves from the present arrangement. Put yourself onto a gold and/or silver standard. We need to tell Washington to leave us alone. States should secede from the union and return to using sound money. Until we are back to using sound money, the price mechanism will not work, the market won't be able to discover real prices, and there will be no economic recovery.
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