[Congressional Record (Bound Edition), Volume 154 (2008), Part 18]
[Extensions of Remarks]
[Pages 24434-24435]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        THE AUSTRIANS ARE RIGHT

                                 ______
                                 

                             HON. RON PAUL

                                of texas

                    in the house of representatives

                      Thursday, November 20, 2008

  Mr. PAUL. Madam Speaker, many Americans are hoping the new 
administration will solve the economic problems we face. That's not 
likely to happen, because the economic advisors to the new President 
have no more understanding of how to get us out of this mess than 
previous administrations and Congresses understood how the crisis was 
brought about in the first place.

[[Page 24435]]

  Except for a rare few, Members of Congress are unaware of Austrian 
Free Market economics. For the last 80 years, the legislative, 
judiciary and executive branches of our government have been totally 
influenced by Keynesian economics. If they had had any understanding of 
the Austrian economic explanation of the business cycle, they would 
have never permitted the dangerous bubbles that always lead to painful 
corrections.
  Today, a major economic crisis is unfolding. New government programs 
are started daily, and future plans are being made for even more. All 
are based on the belief that we're in this mess because free-market 
capitalism and sound money failed. The obsession is with more spending, 
bailouts of bad investments, more debt, and further dollar debasement. 
Many are saying we need an international answer to our problems with 
the establishment of a world central bank and a single fiat reserve 
currency. These suggestions are merely more of the same policies that 
created our mess and are doomed to fail.
  At least 90 percent of the cause for the financial crisis can be laid 
at the doorstep of the Federal Reserve. It is the manipulation of 
credit, the money supply, and interest rates that caused the various 
bubbles to form. Congress added fuel to the fire by various programs 
and institutions like the Community Reinvestment Act, Fannie Mae and 
Freddie Mac, FDIC, and HUD mandates, which were all backed up by 
aggressive court rulings.
  The Fed has now doled out close to $2 trillion in subsidized loans to 
troubled banks and other financial institutions. The Federal Reserve 
and Treasury constantly brag about the need for ``transparency'' and 
``oversight,'' but it's all just talk--they want none of it. They want 
secrecy while the privileged are rescued at the expense of the middle 
class.
  It is unimaginable that Congress could be so derelict in its duty. It 
does nothing but condone the arrogance of the Fed in its refusal to 
tell us where the $2 trillion has gone. All Members of Congress and all 
Americans should be outraged that conditions could deteriorate to this 
degree. It's no wonder that a large and growing number of Americans are 
now demanding an end to the Fed.
  The Federal Reserve created our problem, yet it manages to gain even 
more power in the socialization of the entire financial system. The 
whole bailout process this past year was characterized by no oversight, 
no limits, no concerns, no understanding, and no common sense.
  Similar mistakes were made in the 1930s and ushered in the age of the 
New Deal, the Fair Deal, the Great Society and the supply-siders who 
convinced conservatives that deficits didn't really matter after all, 
since they were anxious to finance a very expensive deficit-financed 
American empire.
  All the programs since the Depression were meant to prevent 
recessions and depressions. Yet all that was done was to plant the 
seeds of the greatest financial bubble in all history. Because of this 
lack of understanding, the stage is now set for massive nationalization 
of the financial system and quite likely the means of production.
  Although it is obvious that the Keynesians were all wrong and 
interventionism and central economic planning don't work, whom are we 
listening to for advice on getting us out of this mess? Unfortunately, 
it's the Keynesians, the socialists, and big-government proponents.
  Who's being ignored? The Austrian free-market economists--the very 
ones who predicted not only the Great Depression, but the calamity 
we're dealing with today. If the crisis was predictable and is 
explainable, why did no one listen? It's because too many politicians 
believed that a free lunch was possible and a new economic paradigm had 
arrived. But we've heard that one before--like the philosopher's stone 
that could turn lead into gold. Prosperity without work is a dream of 
the ages.
  Over and above this are those who understand that political power is 
controlled by those who control the money supply. Liberals and 
conservatives, Republicans and Democrats came to believe, as they were 
taught in our universities, that deficits don't matter and that Federal 
Reserve accommodation by monetizing debt is legitimate and never 
harmful. The truth is otherwise. Central economic planning is always 
harmful. Inflating the money supply and purposely devaluing the dollar 
is always painful and dangerous.
  The policies of big-government proponents are running out of steam. 
Their policies have failed and will continue to fail. Merely doing more 
of what caused the crisis can hardly provide a solution.
  The good news is that Austrian economists are gaining more acceptance 
every day and have a greater chance of influencing our future than 
they've had for a long time.
  The basic problem is that proponents of big government require a 
central bank in order to surreptitiously pay bills without direct 
taxation. Printing needed money delays the payment. Raising taxes would 
reveal the true cost of big government, and the people would revolt. 
But the piper will be paid, and that's what this crisis is all about.
  There are limits. A country cannot forever depend on a central bank 
to keep the economy afloat and the currency functionable through 
constant acceleration of money supply growth. Eventually the laws of 
economics will overrule the politicians, the bureaucrats and the 
central bankers. The system will fail to respond unless the excess debt 
and mal-investment is liquidated. If it goes too far and the wild 
extravagance is not arrested, runaway inflation will result, and an 
entirely new currency will be required to restore growth and reasonable 
political stability.
  The choice we face is ominous: We either accept world-wide 
authoritarian government holding together a flawed system, OR we 
restore the principles of the Constitution, limit government power, 
restore commodity money without a Federal Reserve system, reject world 
government, and promote the cause of peace by protecting liberty 
equally for all persons. Freedom is the answer.

                          ____________________