The FCIC: Passing the Buck

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by Ron Paul: Government
and Gasoline

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week the federal government’s Financial Crisis Inquiry Commission
held hearings as part of their continuing investigation into the
causes of the acute economic meltdown which occurred in late summer
2008. This bipartisan commission, partly inspired by the Pecora
Commission — which investigated the causes of the Great Depression —
is expected to report back to Congress before the end of the year.

Things don’t
seem to be going well. The individuals questioned by the commission
mostly seem to be diverting blame for the whole fiasco to someone
else. Nobody is offering any tangible insights into the causes of
the financial crisis.

the commission will avoid calling any witnesses who might unequivocally
indict the federal government for its role in the crisis, or suggest
solutions which take away government power. Government commissions
have a remarkable tendency to recommend granting even more power
to the same useless government agencies that so utterly fail to
prevent crises in the first place. We saw this with the Pecora Commission,
we saw it after 9-11, and we’re seeing it again today with
regard to financial regulations. For example, this latest commission
almost certainly will suggest granting more power to the SEC, when
in fact the SEC should be abolished as an embarrassing farce. Rest
assured that this recommendation will be made without apology or
sense of irony.

The reality
is that the Federal Reserve relentlessly expanded the money supply
through artificially low interest rates for over two decades, and
this expansion of easy money caused a wholly predictable bubble.
To a myopic Keynesian regulator, the bubble may appear to be caused
by greed, but in truth it is completely predictable that humans
will act in their own perceived self-interest. If the Fed wants
to dole out artificially cheap money, people and businesses —
including Wall Street businesses — will line up to take it.
We can condemn this as greed, but the fundamental problem is Fed
policy itself. There will always be demand for cheap money, but
we should not allow the Fed to debase our currency and create bubbles
of false prosperity to satisfy that demand.

What the commission
really needs are experts who understand free market economics rather
than big government Keynesian fantasies. The commission has none
of these, and has called no true free market witnesses. That perspective
would only distract from their predetermined goals.

The commission
will bemoan the complexity and inscrutability of our economic problems,
but the solution is simple: allow freedom to operate in our markets.
Allow U.S. financial, labor, and housing markets to normalize without
political interference. Though the solution is simple, and rather
obvious, it would not be easy or painless, but we’d be so much
better off for it in the long run. It would require admitting fiat
money is a tangled web of monetary deception prone to catastrophic
failure. It would require allowing Americans to choose a system
of sound money, where the money supply and interest rates are set
by market forces rather than centralized economic planners. Unfortunately,
fiat money is like a drug to a Congress hopelessly addicted to spending
vastly more than the Treasury collects in revenues. Because of this,
our problems can only get worse and more complex before they get

the Ron Paul File

14, 2010

Dr. Ron
Paul is a Republican member of Congress from Texas.

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