I.O.U.S.A - Addison Wiggin [29]
“ True capital comes from savings. You should have what you can earn over and above what you have to use to run your business or live on. This should be savings and that should be used to be loaned out to create more jobs and more wealth; but today, the dollar loses its value, and then it if earns a little interest then we go ahead and tax people for the interest they ’ ve earned. So in order to regenerate savings, you should have sound money, get rid of the devaluation of the currency, and get rid of all taxes on savings, and then people would go back to savings again. At the same time, we should prohibit the Fed from creating money out of thin air. ”
During the mid - to late 1990s, Dr. Paul was one of the only government offi cials who was speaking out about the fl aws that he saw in the U.S. monetary system. And when Dr. Paul spoke out, he went directly to the source: Alan Greenspan, then chairman of the Federal Reserve. His debates with Alan Greenspan at Congressional hearings were leg-endary in D.C. – and Paul was becoming quite well - known, especially in the libertarian circles, for asking the Fed chairman quite pointed questions about the Fed ’ s role in the deprecia-tion of the U.S. dollar, infl ation, and money supply.
In one such debate, Dr. Paul told us, “ I was complaining about the negative savings rate and he [Greenspan] says,
‘ Yeah, but housing prices are going up, and therefore people have savings. ’ I told him that he was getting savings confused with infl ation, because as a consequence of infl ation the nominal price of houses were going up, but that really isn ’ t savings because as something like that can go up in price, it can also go down.
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Chapter 3 The Savings Defi cit 53
“ Today, because we don ’ t have any savings, ” Ron Paul explains, “ we depend on the Fed, and the Fed creates too much money, lowers interest rates too much, and then they create a bubble. How long has it been that many, many good economists have been predicting that the consequence we ’ re facing is the collapse of the housing bubble? When the markets fi nally realize how damaging this is and how pervasive it is and how it ’ s going to affect all of our other markets, we ’ re going to have a lot more unwinding to do and it ’ s going to affect our whole economy, because housing is a signifi cant part. ”
When we met with Dr. Paul in the summer of 2007, the housing market was only just beginning to show cracks in its foundation. Now, in one year ’ s time, the U.S. housing market has collapsed upon itself — and has taken many fi nancial institutions and U.S. home owners down with it.
The society has become addicted
We’ve been so wealthy. We’re
to cheap and easy credit. “ We ’ ve been
still doing pretty well on the sur-
so wealthy. We ’ re still doing pretty face. But the tragedy is it’s all on well on the surface. But the tragedy borrowed money now. The fi nancis it ’ s all on borrowed money now. es are in such disastrous shape The fi nances are in such disastrous because we can’t survive without borrowing two and a half billion
shape because we can ’ t survive with-
dollars every day from overseas.
out borrowing two and a half bil-
Eventually that will create big
lion dollars every day from overseas.
economic problems.
Eventually that will create big eco-
—RON PAUL
nomic problems. ”
Ron Paul’s Historic Love Affair with Alan Greenspan
Ron Paul and Alan Greenspan have had a long and tumultuous relationship, as Dr. Paul took every opportunity to grill the former Fed chairman on his monetary policy decisions, most of which he did not agree with. What follows is testimony from February 17, 2000, at a Congressional hearing on money supply.
(continued)
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54 The
Mission
(continued)
Paul: Good morning, Mr. Greenspan. I see you have stayed on the job in spite of my friendly advice last fall. I thought you should look for different employment but I see you’ve kept your job.
At