Ron Paul: Prepare for the Worst!
Posted by: RenegadeI post this with a lot of sorrow. It is not because I didn’t know what Dr. Paul has to say is true. It is because I know that he is correct. As you visit with your families during these holidays, look at your prodigy and ask yourself what are you willing to do to ensure their liberty.
Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.
A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.
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Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate. We have seen the results of Alan Greenspan’s excessively low interest rates: the housing bubble, the explosion of subprime loans and the subsequent collapse of the bubble, which took down numerous financial institutions. Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers.
This is nothing less than the creation of another bubble. By attempting to cushion the economy from the worst shocks of the housing bubble’s collapse, the Federal Reserve has ensured that the ultimate correction of its flawed economic policies will be more severe than it otherwise would have been. Even with the massive interventions, unemployment is near 10% and likely to increase, foreigners are cutting back on purchases of Treasury debt and the Federal Reserve’s balance sheet remains bloated at an unprecedented $2 trillion. Can anyone realistically argue that a few small upticks in a handful of economic indicators are a sign that the recession is over?
What is more likely happening is a repeat of the Great Depression. We might have up to a year or so of an economy growing just slightly above stagnation, followed by a drop in growth worse than anything we have seen in the past two years. As the housing market fails to return to any sense of normalcy, commercial real estate begins to collapse and manufacturers produce goods that cannot be purchased by debt-strapped consumers, the economy will falter. That will go on until we come to our senses and end this wasteful government spending.
Government intervention cannot lead to economic growth. Where does the money come from for Tarp (Treasury’s program to buy bad bank paper), the stimulus handouts and the cash for clunkers? It can come only from taxpayers, from sales of Treasury debt or through the printing of new money. Paying for these programs out of tax revenues is pure redistribution; it takes money out of one person’s pocket and gives it to someone else without creating any new wealth. Besides, tax revenues have fallen drastically as unemployment has risen, yet government spending continues to increase. As for Treasury debt, the Chinese and other foreign investors are more and more reluctant to buy it, denominated as it is in depreciating dollars.
November 5th, 2009 at 7:31 pm
I remember the stories of the Great Depression being told many times around the kitchen table. None of it was in sorrow. It was in AWE. It brought out the best and the worst of people but from what I’ve heard so often it was only the few who shamed themselves by their behavior. I’m old enough to know some from both sides of that. My white uncle was nursed by the black lady across the street after his mother died in childbirth. That same black woman’s children were fed and clothed by my grandfather because their father had long since gone. He gave them chickens and taught them to garden in the narrow space between their houses. He and the nursing woman were exemplary human beings.
But there were lowlife people too. My own father-in-law abandoned his wife and five children because he was one of those selfish cowards. He traveled the country not for work but for fun and thrills. He got all that from the abandoned wives other cowards left behind. He fathered more kids across the country than he left to starve back home and he never worked a day in his life. My wife and her brothers lived on coffee and bread six days out of the week and their mother ironed and sewed in swap for a chicken on Sundays. But they and others like them made it and they made it with their dignity in tact.
I don’t for a minute think that the caliber of people today can come close to those of the Great Depression. This time round there will be more cowards and thieves and killers than heroes and heroines. So be it. It changes NOTHING.
November 6th, 2009 at 10:53 am
I so wish Ron Paul had been elected President. We would not be in this mess.