Ron Paul: The Entire Economic System is Subprime

Ron Paul questions Ben Bernanke - 11/08/2007 - Hearing of the Joint Economic Committee - The Economic Outlook

The best way to I could describe the problems that we face here in this country, as well as the problem that the Federal Reserve faces, is that we're indeed between a rock and a hard place, because we have a serious problem. We don't talk much about how we got here. We talk about how we're going to patch it up.

The bubble has been burst. We saw what happened after the NASDAQ bubble burst. We don't ask how it was created. And then we have a housing bubble, and it's deflating and then spreading.

And yet, nobody says, where does it come from? And what do -- what is the advice that you generally get? And that is, inflate the currency. They don't say, inflate the currency. They don't say, debase the currency. They don't say, devalue the currency. They don't say cheat the people who are saved. They say, lower the interest rate. But they never ask you, and I don't hear you say too often, the only way I can lower interest rates is I have to create more money. I have to lower the discount rate. I have to make it generous. I have to increase reserves. I have to lower the interest rates and fix the interest rates, overnight rates.

And the only way you can do this is by increasing the money supply. And I see this as the problem that we don't want to talk about. Currently, of course, we can't follow the money supply with M3, but we can follow one of your statistics, which is the MZM, the ready cash available. And we see that inflation is alive and well.

That -- that money supply figure is going up about 20 percent annualized. And this -- this just means that the dollar gets weaker. And everybody says, well, the dollar is -- that's great. The dollar weaker, we're going to have exports. And that is a fallacy. Maybe for a month or two, but it just invites inflation.

And unless we get down to the bottom of it and define what inflation is, and not look at only prices -- this was taught by the free market economists all through the 20th century. They said, beware, they will increase the money supply but they will make you concentrate on prices, and they will you CPIs and PPIs and they'll fudge those figures, and they'll talk about wage and prices controls to solve our problems.

And we ignored the fundamental flaw, and that is, that not only have we had a subprime market in housing, the whole -- the whole economic system is subprime in that we have artificially low interest rates.

And it wasn't under your -- your tenure in office. It's been going on for 10 years or longer, and now we're bearing the fruits of -- fruits of that policy. I mean, a 1 percent interest rate, overnight rate, and that's not a distortion. Instead of looking at these -- the price, the consumer prices, which nobody in this country really believes, we need to talk about the distortion, the mal- investment, the misdirection, the bad information that is gotten from artificially low interest rates.

In many ways, some people refer to you as a price fixer, you know, because you fix interest rates. The market is powerful, and usually overwhelms and does come into play, but when the Fed fixes an interest rate at 1 percent, that is price fixing.

At the end of your testimony, you suggested that we should address this housing crisis, and we should have rules that would address deceptive lending practices. And I just think that is not the answer at all. The real deception is when we distort the value of money, when we create money out of thin air. We have no savings. We get their so-called capital, there is money available, but it comes from what you have to do, and the pressure is put on you. So I think we have to get back to the very fundamentals of where this problem comes from. And the bubbles occur when we have this mal-investment, and the creation of new money.

So my question boils down to this: How in the world can we expect to solve the problems of inflation; that is, the increase in supply of money, with more inflation?

Category:

News & Politics

Tags:

• ron-paul
• federal-reserve
• ben-bernanke
• subprime
• economy
• economics
• inflation

[JWFokker]

Ben Bernanke is an enemy of the state. He and his cronies should be lined up against a wall and shot.

[truefictions]

Ben Bernanke loves Ron Paul :)

Go Ron!

[EliteProdigyX]

Ron: HOW IN THE WORLD CAN WE EXPECT TO SOLVE THE PROBLEMS OF INFLATION, WITH MORE INFLATION?

Bernanke answers with a worthless "its maybe people taking their savings out?", and proceeds by saying, "oh, we're just following the mandates that congress gave us…" (mandates that say make money out of nothing)

Ron ask again

Bernanke avoids answering that there is no solution, it’s a imminent fail system!

Hope this simplified for some

[U1T001]

RE: 'Too much cheap money slushing around ..'

It is rather dynamic money in e-form. A question -What happens with 'the money' upon flash crash at the stock exchange ( May 6th). Where does the money go? Another question - What does it mean for a computer to generate money 'at the speed of light in vacuum' and to impose unbearable debts to humans 'against it'.

IMHO the 'transactions' that are going on at the stock exchange are actually a request for endorsement rather than real world transactions.

[gipetto2]

Too much cheap money slushing around....how do you expect the american public to react?

[U1T001]

The financial system should be landed ASAP by:

1. Reducing the fractional banking from 9:1 to 1:1

2. Maximum allowable interest rate to 2.5% (for corporate customers), and the user & consumer loans to be abolished.

3. Make computer algorithms to land the financial system at the stock exchanges.

4. Gather emergency team of experts to navigate the landing: experts in macroeconomics to specify the 'electric circuits' of the 'time bomb' of the debt, sappers to deactivate it, experts in physics, etc.

[Kavenger11]

Smartest person in washington. Ron Paul 2012

[Meeks861]

@TheNewVideo Your worldview of the "terrorists" is a clear indicaton of your ignorance.

[Meeks861]

@TheNewVideo You need to stop watching fox to gain all of your information for the outside world. Read a book called "confessions of an economic hitman" also this idea that there are these bad terrorists out there looking to destroy america is simply an illusion created by the media. Yes there are people who try to kill us in the mid east, but they are doing so as a result of our occupation there. They fight us with ak-47s, roadside bombs, rpgs, we fight them with tanks and apache helicopters.

[bluesrockfan36]

5: 28 The deval... err *decline* of the dollar, owned.

Runnaway inflation is gonna ruin America.

[theTOOLshed1]

@LeviDanielBarnes

Owned? Not in the least.

Bernake admited that imported goods would cost much more AND do you realize that approximately 65% of all the oil the U.S. consumes is IMPORTED?!

It sucks because the ENTIRE enconomy depends on oil and if you can't pay for that. you can't produce ANYTHING U.S. made... forcing people to buy imported goods and it spirals out from there.

What do you think the machines U.S. farmers use to harvest crops run off of? AIR?!

So no. Ron Paul was not owned.