[Congressional Record (Bound Edition), Volume 147 (2001), Part 15]
[House]
[Pages 21252-21253]
[From the U.S. Government Publishing Office, www.gpo.gov]



                          FOOLISHNESS OF FIAT

  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 world's politicians, special interests, 
government bureaucrats, and financiers all love fiat money because they 
all benefit from it. But freedom-loving, hardworking, ethical and 
thrifty individuals suffer.
  Fiat money is paper money that gets its value from a government edict 
and compulsory legal tender laws. Honest money, something of real 
value, like a precious metal, gets its value from the market and 
through voluntary exchange. The world today is awash in

[[Page 21253]]

fiat money like never before, and we face a financial crisis like never 
before, conceived many decades before the 9-11 crisis hit.
  Fiat money works as long as trust in the currency lasts. But 
eventually trust is always withdrawn from paper money. Fiat money 
evolves out of sound money, which always originates in the market, but 
paper money inevitably fails no matter how hard the beneficiaries try 
to perpetuate the fraud. We are now witnessing the early stages of the 
demise of a worldwide financial system built on the fiction that wealth 
can come out of a printing press or a computer at our central banks.
  Japan, failing to understand this, has tried for more than a decade 
to stimulate her economy and boost her stock market by printing money 
and increasing government spending, and it has not worked. Argentina, 
even with the hopes placed in its currency board, is nevertheless 
facing default on its foreign debt and a crisis in confidence. More 
bailouts from the IMF and U.S. dollar may temper the crisis for a 
while, but ultimately it will only hurt the dollar and the U.S. 
taxpayers.
  We cannot continually bail out others with expansion of the dollar 
money supply, as we have with the crisis in Turkey, Argentina, and the 
countries of Southeast Asia. This policy has its limits, and confidence 
in the dollar is the determining factor. Even though, up until now, 
confidence has reigned, encouraged by our political and economic 
strength, this era is coming to an end. Our homeland has been attacked, 
our enemies are not easily subdued, our commitments abroad are 
unsustainable, and our economy is fast slipping into chaos.
  Printing money is not an answer, yet that is all that is offered. The 
clamor for low-interest rates by all those who benefit from fiat money 
has prompted the Fed to create new money out of thin air like never 
before. Driving the Fed funds rate down from 6.5 percent to 2.5 
percent, a level below the price inflation rate, represents nothing 
short of panic and has done nothing to recharge the economy. But as one 
would expect, confidence in the dollar is waning.
  I am sure, due to the crisis, a faith in fiat and a failure to 
understand the business cycle, the Fed will continue with the only 
thing it knows to do: credit creation and manipulation of interest 
rates.

                              {time}  1815

  This policy reflects the central bank's complete ignorance as to the 
cause of the problem: Credit creation and manipulation of interest 
rates.
  Since the Federal Reserve first panicked in early January, it has 
created $830 billion of fiat money out of thin air. The country is no 
richer. The economy is weaker. The stock market has continued downward, 
and unemployment has skyrocketed. Returning to deficit spending, as we 
already have, will not help us any more than it helped Japan, which 
continues to sink into economic morass.
  Nothing can correct the problems we face if we do not give up on the 
foolishness of fiat.
  Mr. Speaker, a dollar crisis is quickly approaching. We should 
prepare ourselves.

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