[Congressional Record (Bound Edition), Volume 151 (2005), Part 15]
[House]
[Pages 20449-20450]
[From the U.S. Government Publishing Office, www.gpo.gov]




               THE COMING CATEGORY 5 FINANCIAL HURRICANE

  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 tragic events of abject poverty in New 
Orleans revealed on national TV by Katrina's destruction were real eye-
openers for many. These scenes prompted two emotional reactions. One 
side claimed Katrina proved there was not enough government welfare and 
its distribution was based on race. The other side claims we need to 
pump billions of new dollars into the very agency that failed, FEMA, 
while giving it extraordinary new police powers. Both sides support 
more authoritarianism, more centralization, and even the imposition of 
martial law in times of natural disasters.
  There is no hint that we will resort to reason now that the failed 
welfare policies of the past 60 years have been laid bare. Certainly no 
one has connected the tragedy of poverty in New Orleans to the flawed 
monetary system that has significantly contributed to the 
impoverishment of a huge segment of American society.
  Congress reacted to Katrina in the expected irresponsible manner. It 
immediately appropriated over $60 billion with little planning or 
debate. Taxes will not be raised to pay the bill, fortunately. There 
will be no offsets or spending reductions to pay the bill. Welfare and 
entitlement spending is sacrosanct, spending for the war in Iraq and 
the military industrial complex is sacrosanct, but there is no 
guarantee that gracious foreign lenders will step forward, especially 
without raising interest rates. This means the Federal Reserve and the 
Treasury will print the money needed to pay the bills.
  The sad truth is that monetary debasement hurts the poor people the 
most, the very people we saw on TV after Katrina. Inflating our 
currency hurts the poor and destroys the middle class, while 
transferring wealth to the ruling class. This occurs in spite of the 
good intentions and the misplaced compassion.
  We face a coming financial crisis. Our current account deficit is 
more than $600 billion annually. Our foreign debt is now more than $3 
trillion. Foreigners now own over $1.4 trillion of our Treasury and 
mortgage debt. We must borrow $3 billion from foreigners every business 
day to maintain our extravagant spending. Our national debt is now 
increasing over $600 billion per year; and, guess what, we print over 
$600 billion per year to keep the charade going. The national debt is 
approaching $8 trillion, but there is a limit, and I am fearful we are 
fast approaching it.
  Runaway inflation is a well-known phenomenon. It leads to political 
and economic chaos of the kind we witnessed in New Orleans. Hopefully, 
we will come to our senses and not allow that to happen, but we are 
vulnerable, and we have only ourselves to blame.
  The flawed paper money system in existence only since 1971 has 
allowed for the irresponsible spending of the

[[Page 20450]]

past 30 years. Without a linkage to gold, the Washington politicians 
and the Federal reserve have no restraints placed on their power to 
devalue our money by merely printing more to pay the bills run up by 
the welfare-warfare State.
  This system of money is a big contributing factor in the exporting of 
American jobs, especially in the manufacturing industries.
  Since the last link to gold was severed in 1971, the dollar has lost 
92 percent of its value relative to gold, with gold going from $35 an 
ounce to $450 per ounce.
  A major adjustment of the dollar and the current account deficit can 
come anytime, and the longer the delay the greater the distortions will 
be in terms of a correction. In the meantime, we give leverage to our 
economic competitors and our political adversaries, especially China.
  The current system is held together by a false confidence in the U.S. 
dollar that is vulnerable to sudden changes in the economy and 
political events.
  This is my suggestion to my colleagues. Any new expenditures must 
have offsets greater in amount than the new programs. Foreign military 
and foreign aid expenditures must be the first target. The Federal 
Reserve must stop inflating the currency merely for the purpose of 
artificially lowering interest rates to perpetuate a financial bubble.
  This policy allows government and consumer debt to grow beyond 
sustainable levels, while undermining incentives to save. This, in 
turn, undermines capital investment, while exaggerating consumption. If 
this policy does not change, the dollar must fall, and the current 
account deficit will play havoc until the house of cards collapse.
  Our spending habits, in combination with our flawed monetary system, 
if not changed will bring us a financial whirlwind that will make 
Katrina look like a minor storm. Loss of competence in the dollar and 
the international financial system is a frightening possibility, but it 
need not happen if Congress can curb its appetite for buying the 
people's support through unrestrained spending.
  If Congress does not show some sense of financial restraint soon, we 
can expect the poor to become poorer; the middle class to become 
smaller; and the government to get bigger and more authoritarian--while 
the liberty of the people is diminished. The illusion that deficits, 
printing money, and expanding the welfare and warfare states serve the 
people must come to an end.

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