by Ron Paul: The
Myth of Fed Independence
the Committee on Financial Services, U.S. House of Representatives,
July 21, 2009
Reserve in collaboration with the giant banks has created the greatest
financial crisis the world has ever seen.
notion that unlimited amounts of money and credit, created out of
thin air, can provide sustained economic growth has delivered this
crisis to us.
of economic growth and stable prices it has given us a system of
government and finance that now threatens the world financial and
is now 20% and there has not been any economic growth since the
onset of the crisis in the year 2000, according to non-government
debt and credit expansion, over the past 38 years, has come to an
abrupt end — as predicted by free-market economists.
same policy of excessive spending, debt expansion, and monetary
inflation, can only compound the problems and prevent the required
the money supply didn’t work; quadrupling it won’t work either.
of debt must be addressed.
debt when it was a principal cause of the crisis is foolhardy.
government and private debt is a consequence of a loose Federal
Reserve monetary policy. Once a debt crisis hits, the solution must
be paying it off or liquidating it. We are doing neither.
debt is now 372% of GDP. In the crisis of the 1930s it peaked at
debt services requires 14% of the disposable income — an historic
high. Between 2000 and 2007 credit debt expanded five times as fast
as gross domestic product.
restraint on spending, and revenues dropping due to the weak economy,
raising taxes will be poison to the economy.
Buying up the
bad debt of privileged institutions and dumping worthless assets
on the American people is morally wrong and economically futile.
government debt, as the Fed is currently doing, is destined to do
past 12 months the national debt has risen over $2.7 trillion. Future
entitlement obligations are now reaching $100 trillion. US foreign
indebtedness is $6 trillion.
purchases of US securities in May were $7.4 billion, down from a
monthly peak of $95 billion in 2006.
that the Fed had to buy $38.5 billion of government securities last
week indicates that it will continue its complicity with Congress
to monetize the rapidly expanding deficit. This policy is used to
pay for the socialization of America and for the maintenance of
an unwise American empire overseas, and to make up for the diminished
appetite of foreigners for our debt.
attack on the dollar will continue, I would suggest that the problems
we have faced so far are nothing compared to what it will be like
when the world, not only rejects our debt, but our dollar as well.
That’s when we’ll witness political turmoil which will be to no
Paul is a Republican member of Congress from Texas.