[Congressional Record Volume 144, Number 143 (Sunday, October 11, 1998)]
[Extensions of Remarks]
[Page E2055]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        NEW GLOBAL ECONOMIC PLAN

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                             HON. RON PAUL

                                of texas

                    in the house of representatives

                        Friday, October 9, 1998

  Mr. PAUL. Global leaders are scurrying around to put together, as 
quickly as possible, a new plan to solve the international financial 
crisis.
  The world economies have been built on generous credit expansion with 
each country inflating their currencies at different rates. 
Additionally, each country has had different political, tax, and 
regulatory policies leading to various degrees of trust and stability. 
Economies that have ``enjoyed'' inflationary booms, by their very 
nature, must undergo a market correction. The market demands deflation 
of all excesses, while the politicians and special interests agitate 
for continued credit inflation. Under these circumstances, financial 
assets may deflate in price but monetary inflation continues and the 
currency is further depreciated thus putting serious pressure on the 
dollar; as in the case of the United States.
  Fluctuating fiat currencies, no matter how inefficient as compared to 
a world commodity monetary standard, function solely because exchange 
rates are allowed to fluctuate and currency movements across borders 
are freely permitted as capital seeks the most efficient market. This 
process provides an indication when host countries need to improve 
monetary and fiscal policy.
  A gold standard solves capital flow problems automatically and avoids 
all currency speculation. Gold prevents excesses from developing to any 
dangerous level.
  Decades ago, the gold standard was abandoned and now our global 
planners want to take another step to regulate all capital flows 
throughout the world thus removing the only good indicator left to warn 
of dangers ahead and the need for sound reform. The rapid transfer of 
capital around the world is the messenger and not the cause. Killing 
the messenger will only hide and increase distortions while prolonging 
the economic pain.
  The proposal of the Group of 22 to regulate capital flows through a 
new ``World Central Bank'' prevents any effort to restore efficient 
market mechanisms and prevents any serious discussion for using gold as 
the money of choice.
  All money managers in major countries decry currency controls by any 
individual country yet are now about to embark on a new world-wide 
approach to regulating all capital flows--a global economic plan to 
socialize all world credit. But, it won't work because the plan is 
deeply and inherently flawed.
  First, the plan demands additional appropriations to transfer wealth 
from the richer to the poorer nations through increased funding of the 
International Monetary Fund, World Bank, Development Bank, and direct 
foreign aid programs.
  Second, it calls for more credit expansion by the richer nations, 
more loan guarantees, and export-import bank credits and, indirectly, 
by providing credit to the Exchange Stabilization Fund and possibly to 
the Bank International Settlements.
  Third this plan calls for an international government agreement to 
strictly control capital flows and mandate debt forgiveness in contrast 
to allowing countries to default. Controlling swift movements of 
capital is impossible and any attempt only encourages world government 
through planning by a world fiat monetary system. Any temporary 
``benefit'' can only be achieved through an authoritarian approach to 
managing the world economy, all done with the pretense of preserving 
financial stability at the expense of national sovereignty and personal 
liberty.
  Let there be no doubt, the current chaos is being used to promote a 
new world fiat monetary system while giving political powers to its 
managers.
  Instead, we should be talking about abandoning the paper money system 
we have lived with for 27 years. It has, after all, brought us the 
current world-wide financial mess.
  Free markets and stable money should be our goal, not further 
institutionalizing of world economic planning and fiat money at the 
sacrifice of personal liberty. Indeed, we need a serious discussion of 
the current crisis but so far no one should be encouraged by the 
direction in which the Group of 22 is going. Our responsibility here in 
the Congress is to protect the dollar, not to sit idly by as it's being 
deliberately devalued.

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