[Congressional Record (Bound Edition), Volume 147 (2001), Part 2]
[House]
[Pages 1828-1829]
[From the U.S. Government Publishing Office, www.gpo.gov]



                              THE ECONOMY

  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, many government and Federal Reserve officials 
have repeatedly argued that we have no inflation to fear; yet those who 
claim this define inflation as rising consumer and producer prices. 
Although inflation frequently leads to

[[Page 1829]]

price increases, we must remember that the free market definition of 
inflation is the increase in supply of money and credit.
  Monetary inflation is seductive in that it can cause great harm 
without significantly affecting government price indices.

                              {time}  1845

  The excess credit may well go into the stock market and real estate 
speculation, with consumer price increases limited to such things as 
energy, repairs, medical care and other services. One should not 
conclude, as so many have in the past decade, that we have no inflation 
to worry about. Imbalances did develop with the 1990s monetary 
inflation, but were ignored. They are now becoming readily apparent as 
sharp adjustments take place, such as we have seen in the past year 
with the NASDAQ.
  When one is permitted to use rising prices as the definition for 
inflation, it is followed by a nonsensical assumption that a robust 
economy is the cause for rising prices. Foolish conclusions of this 
sort lead our economic planners and Federal Reserve officials to 
attempt to solve the problem of price and labor cost inflation by 
precipitating an economic slowdown.
  Such a deliberate policy is anathema to a free market economy. It is 
always hoped that the planned economic slowdown will not do serious 
harm, but this is never the case. The recession, with rising prices, 
still comes. That is what we are seeing today.
  Raising interest rates six times in 1999 to 2000 has had an effect, 
and the central planners are now worried. Falsely, they believe that if 
only the money spigot is once again turned on, all will be well. That 
will prove to be a pipe dream. It is now recognized that indeed the 
economy has sharply turned downward, which is what was intended. But 
can the downturn be controlled? Not likely. And inflation, by even the 
planners' own definition, is raising its ugly head.
  For instance, in the fourth quarter of last year, labor costs rose at 
an annualized rate of 6.6 percent, the biggest increase in 9 years. 
What is happening to employment conditions? They are deteriorating 
rapidly. Economist Ed Hyman reported that 270,000 people lost their 
jobs in January, a 678 percent increase over a year ago.
  A growing number of economists are now doubtful that private growth 
will save us from the correction that many free market economists 
predicted would come as an inevitable consequence of the interest rate 
distortion that Federal Reserve policy causes.
  Instead of blind faith in the Federal Reserve to run the economy, we 
should become more aware of Congress' responsibility for maintaining a 
sound dollar and removing the monopoly power of our central bank to 
create money and credit out of thin air, and to fix short-term interest 
rates, which is the real cause of our economic downturns.
  Between 1995 and today, Greenspan increased the money supply, as 
measured by MZM, by $1.9 trillion, or a 65 percent increase. There is 
no reason to look any further for the explanation of why the economy is 
slipping, with labor costs rising, energy costs soaring, and medical 
and education costs skyrocketing, while the stock market is 
disintegrating.
  Until we look at the unconstitutional monopoly power the Federal 
Reserve has over money and credit, we can expect a continuation of our 
problems. Demanding lower interest rates is merely insisting the 
Federal Reserve deliberately create even more credit, which caused the 
problem in the first place. We cannot restore soundness to the dollar 
by debasing the dollar, which is what lowering interest rates is all 
about, printing more money.
  When control is lost in a sharp downturn, dealing with it by massive 
monetary inflation may well cause something worse than the stagflation 
that we experienced in the 1970s; an inflationary recession or 
depression could result.
  This need not happen, and will not if we demand that our dollar not 
be casually and deliberately debased by our unaccountable Federal 
Reserve.

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