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Last week the federal
government’s Financial Crisis Inquiry Commission held hearings as part
of their continuing investigation into the causes of the acute economic
meltdown which occurred in late summer 2008. This bipartisan
commission, partly inspired by the Pecora Commission- which investigated the
causes of the Great Depression- is expected to report back to Congress before
the end of the year.
Things don’t seem to be
going well. The individuals questioned by the commission mostly seem to be
diverting blame for the whole fiasco to someone else. Nobody is
offering any tangible insights into the causes of the financial crisis.
Predictably, the commission will
avoid calling any witnesses who might unequivocally indict the federal
government for its role in the crisis, or suggest solutions which take away
government power. Government commissions have a remarkable tendency to
recommend granting even more power to the same useless government agencies
that so utterly fail to prevent crises in the first place. We saw this
with the Pecora Commission, we saw it after 9-11, and we’re seeing it
again today with regard to financial regulations. For example, this
latest commission almost certainly will suggest granting more power to the
SEC, when in fact the SEC should be abolished as an embarrassing farce.
Rest assured that this recommendation will be made without apology or sense
of irony.
The reality is that the Federal
Reserve relentlessly expanded the money supply through artificially low
interest rates for over two decades, and this expansion of easy money caused
a wholly predictable bubble. To a myopic Keynesian regulator, the
bubble may appear to be caused by greed, but in truth it is completely
predictable that humans will act in their own perceived self interest. If
the Fed wants to dole out artificially cheap money, people and businesses-
including Wall Street businesses- will line up to take it. We can
condemn this as greed, but the fundamental problem is Fed policy
itself. There will always be demand for cheap money, but we should not
allow the Fed to debase our currency and create bubbles of false prosperity
to satisfy that demand.
What the commission really needs
are experts who understand free market economics rather than big government
Keynesian fantasies. The commission has none of these, and has called
no true free market witnesses. That perspective would only distract
from their predetermined goals.
The commission will bemoan the
complexity and inscrutability of our economic problems, but the solution is
simple: allow freedom to operate in our markets. Allow U.S. financial, labor, and housing markets to normalize without political
interference. Though solution is simple, and rather obvious, it would
not be easy or painless, but we’d be so much better off for it in the
long run. It would require admitting fiat money is a tangled web of
monetary deception prone to catastrophic failure. It would require
allowing Americans to choose a system of sound money, where the money supply
and interest rates are set by market forces rather than centralized economic
planners. Unfortunately, fiat money is like a drug to a Congress
hopelessly addicted to spending vastly more than the Treasury collects in
revenues. Because of this, our problems can only get worse and more
complex before they get better.
Ron Paul
www.house.gov/paul
Congressman Ron Paul
of Texas enjoys a national reputation as the premier advocate for liberty in
politics today. Dr. Paul is the leading spokesman in Washington for limited
constitutional government, low taxes, free markets, and a return to sound
monetary policies based on commodity-backed currency. For more information
click on the Project Freedom website.
Published with the
authorization of Dr. Paul.
Copyright Dr. Ron
Paul
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