“Therefore I exhort first of all that supplications, prayers, intercessions, and giving of thanks be made for all men, for kings and all who are in authority, that we may lead a quiet and peaceable life in all godliness and reverence. For this is good and acceptable in the sight of God our Savior, who desires all men to be saved and to come to the knowledge of the truth.” I Timothy 2:1-4
“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 only thing we learn from history, I am afraid, is that we do not learn from history.”
Congressman Ron Paul commenting on the current bail out plan
It is not often that the President of our county and his Treasury Secretary go on national TV to tell us that the economy will crater if immediate action is not taken by the Congress. Along with that in the midst of a long week of negotiations we had the largest bank failure in the history of our country with the demise of Washington Mutual.
Obviously this has gotten everyone’s attention and folks are asking what I think. I have two thoughts:
First it should remind us of the importance of Paul’s admonition to pray for our civil leaders: And please note we do not pray for them so we can have secure bank accounts, but rather so we have quiet and peaceable lives that allow the work of the Gospel to go forward. It is because of such passion for the Gospel that America has been greatly blessed and if we lose sight of that passion we will see God’s hand of blessing removed as well. That is the first and foremost responsibility of God’s people and we need to be on our knees!
Second we should be able to address what is going on and to wisely discuss these important matters. I learned a long time ago that if someone else says something well, then it is best to just pass along what they said which I have done below. Congressman Ron Paul ran in the Republican primary earlier this year and his “single-issue” of that campaign was pointing out the fundamental problems we had with our economic system. He was roundly ignored except when someone in the media thought it would be “cute” to talk about the gold standard and set up an interview. Congressman Paul used almost all these interviews to make the case that what we see today was just around the corner if Washington did not fundamentally change the way they were running things. Well, the primaries came just a little too early because suddenly Congressman Paul’s big issue is now front and center so I am passing along his thoughts on what has happened and what should be done.
As I write this the “bailout plan” is stalled and so it is very important that we keep all these official in our prayers this weekend. Whatever action is taken, there are going to be some rough days ahead and we as Christians should approach them as the faithful Church always has: We should see opportunities to trust God, to minister to those in need and to share the Gospel! We learned from Pastor Wilkins at family camp that when ravaging plagues sweep through the Roman cities causing healthy citizens, including the doctors, to flee it was the Christians who went INTO those same cities to minister to the sick. Thus the Roman Empire has joined many others in the dust bin of history, but the Kingdom of God continues to advance!
No matter how ominous the economic storm clouds may appear we must remember that we serve a God who owns the cattle on a thousand hills and that He loves His covenant people.
In the Lamb,
The Austrian School and the Meltdown by Ron Paul by Ron Paul
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 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 which one is the bigger celebrity, 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.
September 26, 2008
Dr. Ron Paul is a Republican member of Congress from Texas.
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