Is the Perfect Storm Forming for Ron Paul?

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What a week! The stock market took a dive to just over 13,000 on the Dow Jones Industrial Average from an all-time high of 14,000 less than a month ago. The world’s major central banks flooded the financial system with tens of billions of dollars to prop up the banks and the mortgage market.

Meanwhile, the unending wars in Afghanistan and Iraq continue to drain the U.S. military; the bills for the Bush-Cheney invasion of two nations that did not attack us or threaten to attack us are rocketing to the one trillion dollar mark.

In other words, we are witnessing the unfolding of the collapse of the welfare–warfare–fiat-money complex that has ruled America since 1913, the year the Federal Reserve was created and the Sixteenth Amendment was added to the U.S. Constitution allowing the federal government to impose an income tax on the American people.

Of all the GOP and Democrat presidential candidates, only Representative Ron Paul of Texas has been diagnosing correctly the shortcomings of the welfare–warfare–fiat-money state. In fact, last Friday on Larry Kudlow’s CNBC show Dr. Paul demonstrated once again why he is the only presidential candidate who understands how the Federal Reserve creates financial bubbles that always end in pain and suffering, especially for low and middle income Americans.

Economist Murray Rothbard identified the losers in the inflation race:

Inflation…redistributes the wealth in favor of the first-comers and at the expense of the laggards in the race. And inflation is, in effect, a race – to see who can get the new money earliest. The latecomers – the ones stuck with the loss – are often called the "fixed income groups." Ministers, teachers, people on salaries, lag notoriously behind other groups in acquiring the new money. Particular sufferers will be those depending on fixed money contracts – contracts made in the days before the inflationary rise in prices. Life insurance beneficiaries and annuitants, retired persons living off pensions, landlords with long term leases, bondholders and other creditors, those holding cash, all will bear the brunt of the inflation. They will be the ones who are "taxed."

And who are the winners? Wall Street banks, real estate speculators and others who are the initial recipients of easy money.

So, if we want to end the boom and bust cycle we need to restore sound money – gold and silver as the foundation of our monetary system, as prescribed the U.S. Constitution. At the very least, the FED should stop creating money out of thin air. But stopping the inflating of the nation’s currency would not sit well with the Wall Street crowd, because they are the prime beneficiaries of easy money. In other words, halting inflation would drop real estate prices in the Hamptons, Aspen and other locations where the beneficiaries of inflation have bid up the price of houses and condos. And forget about those end-of-year bonuses. Under a sound monetary system, speculating in currency and other markets would be greatly diminished.

As a student of the Austrian School of Economics, Dr. Paul is familiar with the contributions of Ludwig von Mises, Murray Rothbard, Henry Hazlitt and dozens of others who advocated free markets and sound money. Professor Mises spent his long academic career warning about the dangers of inflation, the printing of money by central bankers.

Professor Mises long ago showed the relationship between war and inflation, a point Rep. Paul has reiterated throughout his campaign for the GOP presidential nomination.

“Inflationism, however, is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time. Just as the sound money policy of gold standard advocates went hand in hand with liberalism, free trade, capitalism and peace, so is inflationism part and parcel of imperialism, militarism, protectionism, statism and socialism.”

Mises used liberalism in its original meaning: limited government, low taxes, and free trade. The term has been hijacked in the 20th century by the proponents of big government.

War, credit bubbles, runaway government spending, a bankrupt entitlement system, are the result of big government liberalism and neo-conservatism.

Last Saturday, Rep. Paul clearly and passionately spoke the truth about these issues at the Iowa Straw poll conference center. Coming in fifth place with just under 10 percent of the vote is a great achievement in his long-shot campaign for the GOP presidential nomination.

Once GOP voters realize where inflation and war are taking the country, they will rally around Ron Paul, the only candidate for peace, freedom and prosperity.

August 14, 2007