[Congressional Record (Bound Edition), Volume 155 (2009), Part 1]
[House]
[Page 1225]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        LIVING BENEATH OUR MEANS

  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, it has been said, and all too often ignored, 
if you live beyond your means, you will be forced to live beneath your 
means.
  Living and consuming on borrowed money always end. Lenders, even in 
an age of inflation, have their limits. When living extravagantly, it 
seems the good times will continue forever, but when the bills come due 
and the debt, with interest, needs to be paid, the good times end.
  The fiction that the appreciating prices of houses and stocks and 
other assets serve as savings is always self-limited and ends with 
pain. Without a source of newly borrowed funds, once the value of 
stocks and houses depreciates, the individual comes to the realization 
that hard work and effort are required to produce sustained wealth. 
Working minimally is replaced with working maximally to survive, as 
well as to pay for the extravagance of previous years. The consequence 
is more work and a diminished standard of living.
  A nation that has lived beyond its means for a long period of time 
must go through a similar process. Once the national debt grows to an 
extreme proportion, as ours has, there is no possibility of it being 
paid off in the conventional sense. Default and liquidation are 
required, but sovereign states that enjoy the ruthless power to tax and 
create new money always resort to paying their pays by deliberately 
depreciating the currency. This makes it hard to identify the victims 
and the beneficiaries.
  Today's middle class and poor are suffering and the elite are being 
bailed out, and all the while the Federal Reserve refuses to tell the 
Congress exactly who has benefitted by its largesse. The beneficial 
corrections that come with a recession, of debt liquidation and 
removing the malinvestment, are delayed by government bailouts. This 
strategy proved in the late 1930s to transform a recession into a Great 
Depression and will surely do so again.
  We have become the greatest debtor nation in the world. The borrowed 
money was not used to build our industries but was used mainly for 
consumption. The fact that the world trusted the dollar as the reserve 
currency significantly contributed to the imbalances of the world 
financial system. The fiat dollar standard that evolved after the 
breakdown of Bretton Woods in 1971 has ended. This is a consequence of 
our privileged position of living way beyond our means for too many 
years.
  At present, all efforts worldwide are directed toward salvaging a 
financial system that cannot be revived. The only tool the economic 
planners have is the creation of trillions of dollars of new money out 
of thin air. All this does is delay the inevitable and magnify the 
future danger.
  Central bank cooperation in the scheme will not make it work. 
Pretending the dollar is maintaining real value by manipulating the 
price of gold--the historic mechanism for measuring a currency's 
value--will work no better than the effort of the 1960s to keep gold at 
$35 an ounce. Nevertheless, Bretton Woods failed in 1971, as was 
predicted by the free market economists, despite these efforts.
  This crisis we're in is destined to get much worse because the real 
cause is not acknowledged. Not only are the corrections delayed and 
distorted, additional problems are yet to be dealt with--the commercial 
property bubble, the insolvent retirement funds, both private and 
public, state finances, and the university trust funds. For all these 
problems, only massive currency inflation is offered by the Fed. The 
real concern ought to be for a dollar crisis, which will come if we 
don't change our ways.
  Even massive bailouts cannot work. If they did, no person in the 
United States would ever have to work again. We need to wake up and 
recognize the importance of sound money. We need to reintroduce the 
work ethic. We must once again cherish savings over consumption. We 
must recognize that an overextended foreign policy has been the 
downfall of all great nations. And, above all else, we need to simply 
believe once again in the free society that made America great.

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