LilBambi’s Blog – BambisMusings

The Austrians Were Right by Ron Paul

Before the U.S. House of Representatives, November 20, 2008

Madame 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.

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% 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.

Ron Paul has much more to say in the article, and the answer … If only they’d listen….

And the answer is NOT continuing to pump more and more water into a bucket that is riddled with holes!

EDIT: added the info below:

We must remember that governments do not produce anything. Their only resources come from producers in the economy through such means as inflation and taxation. The government has an obligation to be good stewards of these resources. In bailing out failing companies, they are confiscating money from productive members of the economy and giving it to failing ones. By sustaining companies with obsolete or unsustainable business models, the government prevents their resources from being liquidated and made available to other companies that can put them to better, more productive use. An essential element of a healthy free market, is that both success and failure must be permitted to happen when they are earned. But instead with a bailout, the rewards are reversed – the proceeds from successful entities are given to failing ones. How this is supposed to be good for our economy is beyond me.

Much more in Ron Paul’s Texas Straight Talk article “The Bailout Surge.”