[Congressional Record Volume 144, Number 135 (Thursday, October 1, 1998)]
[House]
[Page H9208]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             {time}   1730
                        WORLD FINANCIAL MARKETS

  The SPEAKER pro tempore (Mr. Everett). Under a previous order of the 
House, the gentleman from Texas (Mr. Paul) is recognized for 5 minutes.
  Mr. PAUL. Mr. Speaker, the world financial markets have been in chaos 
now for nearly a year and a half. The problem surrounding long-term 
capital investment is only one more item to add to the list. The entire 
process represents the unwinding of speculative investments encouraged 
by years of easy credit. By the way, Long Term Credit Management is not 
even an American corporation. It is registered in the Cayman Islands, I 
am sure for tax purposes.
  The mess we are witnessing in the world today was a predictable 
event. Artificially low interest rates and easy credit causes 
malinvestment, overcapacity, excessive borrowing and uncontrolled 
speculation.
  We have had now for 27 years a world saturated with fiat currencies 
and not one has had a definable unit of account.
  There have been no restraints on the world monetary managers to 
expand their money supplies, fix short-term interest rates or 
deliberately debase their currencies. Although.
  Short-term benefits were enjoyed, it is clear now they were not worth 
the resulting chaos. We need not look for the cause which puts the 
dollar, our economy and our financial markets at risk. The previous 
boom supported by the illusion of wealth coming from money creation is 
the cause of current world events, and it guarantees further unwinding 
of the speculative orgy of the past decades.
  This cannot be prevented. All that we can hope for is to not prolong 
the agony, as our monetary and fiscal policies did in the U.S. in the 
1930s and as they are currently doing in Japan and elsewhere in the 
world.
  More Federal Reserve fixing of interest rates and credit expansion 
can hardly solve our problems when this has been precisely the cause of 
the mess in which we currently find ourselves.
  Price fixing of interest rates contradicts the basic tenets of 
capitalism. Let it no more be said that today's mess with financial 
markets is a result of capitalism's shortcomings. Nothing is further 
from the truth. Allowing the market to operate even under today's 
dangerous conditions is still the best option for dealing with hedge 
fund's gambling mistakes, both current and future.
  A Federal Reserve orchestrated and arm-twisting bailout of LTCM 
associated with less than a coincidentally announced credit expansion 
only puts long-term pressure on the dollar. All Americans suffer when 
the dollar is debased. Congress's responsibility is to the dollar and 
not foreign currencies, not foreign economies or international hedge 
funds which get in over their heads.
  No amount of regulation could have prevented or in the future prevent 
the inevitable mistakes made in an economy that is misled by rigged 
interest rates or a money supply dictated by central planners in a fiat 
money system. Hedge fund operations, because they are international in 
scope, are impossible to regulate and for the current ongoing crisis it 
is too late anyway.
  Credit conditions that allow a company with less than $1 billion in 
capital to buy $100 billion worth of stock with borrowed money and 
manage $1.2 trillion worth of derivatives is about as classic an 
example as one could ever find of speculative excess brought on by easy 
credit. As long as capital is thought to come from a computer at the 
Federal Reserve and not from savings, the financial problems the world 
faces today will persist.
  Our problems today should not be used to justify a worldwide central 
bank, as has been proposed. What we need is sound money without the 
central planning efforts of a Federal Reserve system fixing interest 
rates and regulating the money supply. Let us give freedom a chance.

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