[Congressional Record Volume 147, Number 39 (Thursday, March 22, 2001)]
[House]
[Page H1102]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      ADDRESSING MONETARY PROBLEMS

  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 markets today are reeling. The financial 
markets are indeed in big trouble. This could mean a couple of things 
to all of us. First, it could mean economic hardship for many of our 
citizens. It also could mean that our budget figures will be completely 
changed here in the not-too-distant future, and we should be paying 
attention.
  Some people claim that they are not quite sure why markets go up and 
all of a sudden crash; and others say if only Alan Greenspan would just 
print more money, inflate the currency faster, lower the interest 
rates, all would be well. But I do not think it is that simple.
  It is very clear that we have these cycles and these booms coming 
from a monetary system that is pure fiat. Fiat money means that the 
money is created out of thin air, and the characteristic of a fiat 
monetary system is that you have overspeculation, you have stock market 
booms, you have stock market crashes, and you have a business cycle. 
This comes from the mismanagement of money, mainly because man, in his 
efforts to plan, to have economic central planning through monetary 
policy, is incapable of providing the information necessary that a free 
market is supposed to have.
  Only a free market can tell us what interest rates should be or what 
the money supply should be. But we have become dependent on a Federal 
Reserve system that pretends to know all these things, and we have 
allowed Alan Greenspan to believe that he can regulate the entire 
economy as well as the stock market by the Open Market Committee.
  Inflation is nothing more than the creation of new money out of thin 
air. Sometimes it raises prices in certain areas, and other times in 
other places. But the whole principle of fiat money is when you create 
new money, you devalue/lower the value of the dollar.
  This is what is happening. Right now we are increasing the money 
supply as measured by MZM at the rate of 20 percent per year. This 
means that, ultimately, that dollar that we use to purchase goods and 
services will go down in value. And yet the only thing that we hear 
about is the cry to the Federal Reserve, just print more money, faster, 
because that will save us all. It will raise the stock market; it will 
make sure that the economy does not go down and go into a downturn.
  This is not the case. Ultimately what we have to have is monetary 
reform, currency reform. We have to have a time when once again we have 
money that cannot be created out of thin air. We have to have money of 
value, something that governments and politicians cannot create out of 
thin air. Unless we address that, we are going to continue with these 
problems.
  This can be very serious. Just in the last year there has been $4 
trillion of value lost in the stock market. Of course, it was 
artificially high, and now it is going to be artificially low, and 
these sudden changes reflect the disequilibrium built into the system 
once we have a monetary system of this sort.
  In 1996, the chairman of the Federal Reserve Board talked about the 
exuberance, the irrational exuberance in the stock market; and yet I 
think he knew, I certainly knew, and others knew, that there was 
irrational exuberance, because even at that time we were printing money 
like crazy. There was overspeculation.
  If he had been seriously concerned about the exuberance getting out 
of control in 1996, he might have considered not inflating the currency 
quite so rapidly, not devaluing the money quite so rapidly. But what 
has he done since that time? The Federal Reserve has literally created 
$2.3 trillion of new money since 1996, further creating a bigger 
bubble, which eventually had to collapse, and that is what we are in 
the midst of. It can be tough. It is going to be tough for a lot of 
people. We can have this economic downturn, and this means jobs and a 
standard of living that will be threatened.
  This type of a monetary system also encourages us to do things 
unwisely. When interest rates are lower than they are supposed to be, 
we borrow more money and we do not save as much money, so savings has a 
negative rate. Yet people are way in debt, business people are in debt, 
and then business people are actually encouraged to do things that are 
not wise. They overbuild; they build into the system overcapacity and 
mal-investment which eventually has to be cleansed out of the system.
  So this mantra of saying all we need is more inflation will not work. 
Inflation caused the problem. The inflation of the monetary system is 
the problem. To believe that all we need is more inflation to solve the 
problem is a serious error. We need currency reform.

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