Congressman Ron Paul (R-TX)
I have, for the past 35 years, expressed my grave concern for the future of America. The course we have taken over the past century has threatened our liberties, security and prosperity. In spite of these long-held concerns, I have days—growing more frequently all the time—when I’m convinced the time is now upon us that some Big Events are about to occur. These fast-approaching events will not go unnoticed. They will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed.
Though the world has long suffered from the senselessness of wars that should have been avoided, my greatest fear is that the course on which we find ourselves will bring even greater conflict and economic suffering to the innocent people of the world—unless we quickly change our ways. America, with her traditions of free markets and property rights, led the way toward great wealth and progress throughout the world as well as at home. Since we have lost our confidence in the principles of liberty, self reliance, hard work and frugality, and instead took on empire building, financed through inflation and debt, all this has changed. This is indeed frightening and historic.
The problem we face is not new in history. Authoritarianism has been around a long time. For centuries, inflation and debt have been used by tyrants to hold power, promote aggression, and provide “bread and circuses” for the people. The notion that a country can afford “guns and butter” with no significant penalty existed even before the 1960s when it became a popular slogan. It was then, though, we were told the Vietnam War and a massive expansion of the welfare state were not problems. The seventies proved that assumption wrong, but today things are different from even ancient times or the 1970s.
There is something to the argument that we are now a global economy. The world has more people and is more integrated due to modern technology, communications, and travel. If modern technology had been used to promote the ideas of liberty, free markets, sound money and trade, it would have ushered in a new golden age—a globalism we could accept. Instead, the wealth and freedom we now enjoy are shrinking and rest upon a fragile philosophic infrastructure. It is not unlike the levies and bridges in our own country that our system of war and welfare has caused us to ignore.
I’m fearful that my concerns have been legitimate and may even be worse than I first thought. They are now at our doorstep. Time is short for making a course correction before this grand experiment in liberty goes into deep hibernation.
There are reasons to believe this coming crisis is different and bigger than the world has ever experienced. Instead of using globalism in a positive fashion, it’s been used to globalize all of the mistakes of the politicians, bureaucrats and central bankers.
Being an unchallenged, sole-superpower was never accepted by us with a sense of humility and respect. Our arrogance and aggressiveness have been used to promote a world empire backed by the most powerful army of history. This type of globalist intervention creates problems for all citizens of the world and fails to contribute to the well-being of the world’s populations. Just think how our personal liberties have been trashed here at home in the last decade.
The financial crisis, still in its early stages, is apparent to everyone: gasoline prices over $4 a gallon; skyrocketing education and medical-care costs; the collapse of the housing bubble; the bursting of the NASDAQ bubble; stock markets plunging; unemployment rising; massive underemployment; excessive government debt; and unmanageable personal debt. Little doubt exists as to whether we’ll get stagflation. The question that will soon be asked is: When will the stagflation become an inflationary depression?
There are various reasons that the world economy has been globalized and the problems we face are worldwide. We cannot understand what we’re facing without understanding fiat money and the long-developing dollar bubble.
“The Latin term “fiat” roughly translates to “there shall be.” Fiat money refers to money that exists because the government declares it into existence. It is not based on production or earnings, and not backed by any commodity. It is solely based on trusting the government. Fiat money is exchanged in the economy as long as there is faith in the government that issues it. … History has shown that fiat money, or “faith-based currency” always fails, because when governments claim this power, they always behave irresponsibly.”
Ron Paul, Faith-based Currency
There were several stages. From the inception of the Federal Reserve System in 1913 to 1933, the Central Bank established itself as the official dollar manager. By 1933, Americans could no longer own gold, thus removing restraint on the Federal Reserve to inflate for war and welfare.
By 1945, further restraints were removed by creating the Bretton-Woods Monetary System making the dollar the reserve currency of the world. This system lasted up until 1971. During the period between 1945 and 1971, some restraints on the Fed remained in place. Foreigners, but not Americans, could convert dollars to gold at $35 an ounce. Due to the excessive dollars being created, that system came to an end in 1971.
In these past 35 years, we have ironically benefited from this very flawed system. Because the world accepted dollars as if they were gold, we only had to counterfeit more dollars, spend them overseas (encouraging our jobs to go overseas as well) and enjoy our unearned prosperity. Those who took our dollars and gave us goods and services were only too anxious to loan those dollars back to us. This allowed us to export our inflation and delay the consequences we are starting to see.
But it was never destined to last, and now we have to pay the piper. Our huge foreign debt must be paid or liquidated. Our entitlements are coming due just as the world has become more reluctant to hold dollars. The consequence of that decision is price inflation in this country—and that’s what we are witnessing today. Already price inflation overseas is even higher than here at home as a consequence of foreign central banks’ willingness to monetize our debt.
This bubble is different and bigger for another reason. The central banks of the world [had] agreements to “monetize” US debt these past 15 years—although secretly and out of the reach of any oversight of anyone—especially the US Congress that doesn’t care, or just flat doesn’t understand. As this “gift” to us comes to an end, our problems worsen. The central banks and the various governments are very powerful, but … when the people who get stuck holding the bag (of bad dollars) catch on and spend the dollars into the economy with emotional zeal, inflationary fever will ignite.
This time—since there are so many dollars and so many countries involved—the Fed has been able to “paper” over every approaching crisis for the past 15 years, especially with Alan Greenspan as Chairman of the Federal Reserve Board, which has allowed this bubble to become history’s greatest.
There are two choices that people can make. The one choice that is unavailable to us is to limp along with the status quo and prop up the system with more debt, inflation and lies. That won’t happen.
One of the two choices, and the one chosen so often by government in the past is that of rejecting the principles of liberty and resorting to even bigger and more authoritarian government. Some argue in favor of giving dictatorial powers to the President, as we have already allowed him to run the American empire, as what we should do.
That is the great danger, and in this post-9/11 atmosphere, too many Americans are seeking safety over freedom. We have lost too many of our personal liberties already. Real fear of economic collapse could prompt central planners to act to such a degree that the New Deal of the 30’s might look like Jefferson’s Declaration of Independence.
The more the government is allowed to take over and run the economy, the deeper the depression would get and the longer it would last. That was the story of the 30s and the same mistakes are likely to be made again if we do not wake up.
But the good news is that it need not be so bad if we do the right thing. I saw “Something Big” happening in the past 18 months on the campaign trail. I was encouraged that we are capable of waking up and doing the right thing. If more hear the message of liberty, more will join in this effort. The failure of our foreign policy, welfare system, monetary policies and virtually all government solutions are so readily apparent, it doesn’t take that much convincing. But the positive message of how freedom works is what is urgently needed.
Restoring a free society doesn’t eliminate the need to get our house in order and to pay for the extravagant spending. But the pain would not be long-lasting if we did the right things, and best of all—the empire would have to end for financial reasons. Our wars would stop, the attacks on civil liberties would cease, and prosperity would return. The choices are clear: it shouldn’t be difficult, but the big event now unfolding gives us a great opportunity to reverse the tide and resume the truly great American Revolution started in 1776. Opportunity knocks in spite of the urgent dangers we face.
Let’s make “Something Big is Happening” be the discovery that freedom works and is popular, and the big economic and political event we’re witnessing is a blessing in disguise.