[Congressional Record Volume 144, Number 119 (Thursday, September 10, 1998)]
[House]
[Pages H7555-H7556]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       WORLDWIDE FINANCIAL CRISIS

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Texas (Mr. Paul) is recognized for 5 minutes.
  Mr. PAUL. Mr. Speaker, the largest of all bubbles is now bursting. 
This is a worldwide phenomenon starting originally in Japan 9 years 
ago, spreading to East Asia last year, and now significantly affecting 
U.S. markets.
  All financial bubbles are currency driven. When central banks 
generously create credit out of thin air speculation, debt, and 
malinvestment result. Early on the stimulative effect is welcomed and 
applauded as the boom part of the cycle progresses. But illusions of 
wealth brought about by artificial wealth creation end when the 
predictable correction arrives. Then we see the panic and 
disappointment as wealth is wiped off the books.
  These events only occur when governments and central banks are given 
arbitrary authority to create money and credit out of thin air. Paper 
money systems are notoriously unstable; and the longer they last, the 
more vulnerable they are to sudden and sharp downturns.
  All countries of the world have participated in this massive 
inflationary bubble with the dollar leading the way. Being a political 
and economic powerhouse, U.S. policy and the dollar has

[[Page H7556]]

had a major influence throughout the world and, in many ways, has been 
the engine of inflation driving world financial markets for years.
  But economic law dictates that adjustments will be made for all the 
bad investment decisions based on erroneous information about interest 
rates, the money supply, and savings.
  The current system eventually promotes overcapacity and debt that 
cannot be sustained. The result is a slump, a recession, or even a 
depression. When the government makes an effort to prevent a swift, 
sharp correction, the agony of liquidation is prolonged and deepened. 
This is what is happening in Japan and other Asian countries today. We 
made the same mistake in the 1930s.
  A crisis brought on by monetary inflation cannot be aborted by more 
monetary inflation or the IMF bailouts favored by the American 
taxpayer. It may at times delay the inevitable, but eventually, the 
market will demand liquidation of the malinvestment, excessive debt, 
and correction of speculative high prices as we have seen in the 
financial markets.
  All this could have been prevented by a sound monetary system, one 
without a central bank that has monopoly power over money and credit 
and pursues central economic planning. My concern is profound. The 
retirement and savings of millions of Americans are jeopardized. 
Economic growth could be reversed sharply and quickly as it already has 
in the Asian countries. Budget numbers will need to be sharply revised.
  The Federal Reserve hints at lower interest rates which means more 
easy credit. This may be construed as a positive for the market, but it 
only perpetuates a flawed monetary system.
  Protecting the dollar is our job here in the Congress, and we are not 
paying much attention. Although turmoil elsewhere in the world has 
given a recent boost to the dollar, signs are appearing that the 
dollar, unbacked by anything of real value, is vulnerable. Setting a 
standard for the dollar with real value behind it can restore trust to 
the system and will become crucial in solving our problems, soon to 
become more apparent.
  The sooner we understand the nature of the problem and start serious 
discussions on how to restore soundness to our money the sooner we can 
secure the savings, investments, and retirements of all Americans.

                          ____________________