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  • October 3, 2008 03:54 PM EDT by Elizabeth MacDonald

    Ron Paul's Texas Straight Talk on the Bailout

    If there's anyone in Congress who should feel like he has been shouting into a field of cotton, it should be Congressman Ron Paul (R-Texas).

    And sometimes a journalist just needs to yield the platform for once, for God's sakes, to someone who is trying to bring some common sense to the debate.

    Because God knows we TV gasbags have done enough, doing our part to add to global warming, taking out Arctic glaciers on a daily basis.

    T. Boone Pickens, who now advocates a major wind energy plan, should realize that the Central Bank of Wind, the Saudi Arabia of Wind is not Tornado Alley--it stretches from right here in media land in New York City down to outside the halls of Congress.

    Yes, Dr. Paul has been criticized and ridiculed. By those who live in an echo chamber and don't give anyone except those who agree with themselves a fair hearing. It's time to listen to all points of view, because we are living through one of the rare times when the landscape of this economy is being permanently changed.

    I am printing below Dr. Paul's thoughts on the historic bailout of the financial sector.

    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 a commodity-backed currency, his bio reads.

    He is a strong advocate for sound monetary policy and is an unrelenting critic of the Federal Reserve's inflationary measures.

    Dr. Paul is known among both his colleagues in Congress and his constituents for his consistent voting record in the House of Representatives. Dr. Paul never votes for legislation unless the proposed measure is expressly authorized by the US Constitution, his bio notes.

    Dr. Paul serves on the House Financial Services Committee, the International Relations committee, and the Joint Economic Committee.

    And he is the author of several books, including Challenge to Liberty; The Case for Gold; and A Republic, If You Can Keep It. He has been a distinguished counselor to the Ludwig von Mises Institute, and is widely quoted by scholars and writers in the fields of monetary policy, banking, and political economy.

    Here now is Rep. Paul:

    Paul Fears Bailout Could Tank the Economy

    The following is taken from a news report quoting Dr. Paul:

    The so-called financial "bailout" package could end up tanking the economy, warns Paul. "We're trying to prop up bad debt," he warns.

    Congressman Paul argued that a bailout does not address the underlying problems that caused the current crisis.

    The bad debt should be "wiped off the books" rather than purchased by taxpayers, Paul argued. The Texas congressman said he would vote against the bill, citing a response of 9-1 against it by his constituents.

    On a more ominous note, Paul warned of lean economic times ahead. "We will have our recession," he said, warning that it could turn into a major "depression" if the bailout bill in its current form was signed into law. "We built this problem by...irresponsible spending," Paul said.

    Spending to Wipe Out Bad Debt Equals Inflation

    He said the bailout bill would make the economy worse. "It's propping up bad debt with more spending," he said. "As long as you can create new money, you create more inflation" he said, referring to the power of the Federal Reserve to introduce new money into the banking system.

    Before the late 1960s, the Fed had to keep a percentage of gold on hand for every Federal Reserve note it issued. These constraints were removed by Congress in the mid to late 1960s during the administration of President Lyndon Johnson, thus giving the Fed a blank check on how much currency it could put into circulation.

    It forced Johnson's successor, President Richard Nixon, to remove the final restraint, pegging the dollar to a fixed gold price. This created an inflationary spiral that was not quashed until the mid-1980s via the restrained monetary policy of then-Fed Chairman Paul Volcker.

    Paul's remarks indicated that he believes the economy could be headed for a similar inflationary spiral.

    But Paul had a few good things to say about the bailout bill. "I think there have been a few improvements," Paul said, citing tax breaks and cuts tacked on to the $700 bn in taxpayer-funded buyouts that could make the bill more appealing to legislators. "Maybe the markets will like that for a little while."

    Words of Warning

    Here is Rep. Paul on the biggest bailout in the government's history, words he wrote before the U.S. House of Representatives voted to approve the bill Friday:

    This time last week, the biggest bailout in the history of the world seemed to be a fait accompli. 

    Last weekend, the Fed Chairman and the Secretary of the Treasury had harsh words of doom and gloom for Congressional leaders, with the rest of the administration parroting along, and by last Monday it seemed both parties were about to fall in line and vote our Republic away by socializing the banking industry through this bailout. 

    Foolish business behavior was about to be rewarded, and propped up a little longer, the bubble blown a little bigger, and our coming Depression made that much greater, but then something happened on the way to the House floor.

    Citizens made their voices heard. 

    The real story behind the story in Congress this week was the thousands of calls and emails sent to Representatives, clogging up inboxes and even slowing down the House internet system. 

    Slowly, like the Titanic turning around, sentiments on the Hill shifted, and we heard Congressmen capitulating and changing their tune a little, desperately trying to find ways to salvage the bailout without completely enraging their constituencies.

    Now we hear about taxpayer protections, about golden parachutes, and about other nuances that hardly cover up the fact that we would be creating more money out of thin air and further devaluing the dollar! 

    The problem is not HOW the government is spending this money; it's the fact that the government is spending this money. We don't have it. We are already nearly $10 tn in debt, not including unfunded liabilities. 

    We already spend about $1 tn a year we don't have on our overseas empire. Now nearly $1 tn more is somehow supposed to magically appear and solve all our problems!  No -- creating more money might delay the inevitable for some well-connected banks on Wall Street, but in a few weeks we will find ourselves right back in this same position, but much poorer.

    The unfortunate thing is that we've already spent at least $700 bn on other bailouts that did not solve the problem. And while all this negotiation was taking place, the auto industry was quietly bailed out, with no controversy, no discussion, to the tune of $25 bn.

    Inevitably, it appears Congress will call their constituents' bluff and the bailout will pass, because that is the habit Wall Street and Washington have fallen into. People are right to be concerned about our financial future. 

    I've been talking for 30-some years about reasons we need to be concerned and change our ways. We find ourselves now in a position of no good options, and no silver bullets. 

    But the worst thing we can do is to compound our problems by intensifying the mistakes of the past. 

    We do have tough economic times ahead, no doubt, no matter what we do, even if we do nothing. 

    The question is, will we have the courage to take our medicine now and get it over with, or will we prolong the misery for many years to come? I'm less and less optimistic about the answer to that question.

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Ron Aldof

The congress except for one is a bunch of bloated over paid clowns. They say it was a bad bill. Then they vote for it. What kind of stupidity is that? Why not sit back, look at it. Cut the things out that stunk and then pass it? They are the most foolish blowhards that you could ever imagine. Ron Paul warned of this years ago. They never listen. It is like they are a bunch of children. Looking to do as they are told to do. But in a way, they don't listen to what thier parents tell them what will harm them. Ron Paul RULES!

October 3, 2008 at 9:55 pm

Phyllis Adee

It is hard to beleive that our leaders do not have an understanding of basic rules of a budget. Being irresponsible with personal finance is not the same as being irresponsible with the peoples money. 101 of spending other peoples money is that you need to be accountable for every penney and you have a feduciary obligation. I am sorry that the American people have been brainwashed to trust their leders to the point of not thinking on thier own. We have also let our gaurd down thinking we are on top of the world, but have not taken the time to make sure that is true. We need to question everything. Thank you. Phyllis Adee

October 3, 2008 at 9:50 pm

charles ranalli

thank you Elizabeth MacDonald. charles ranalli albuquerque

October 3, 2008 at 9:45 pm

joey45

This vote is the WORST travesty of ignoring the will of the people in recorded American history. There will be a reaction on the part of the public...you have awakened the "Sleeping Giant," and you will pay dearly. I suppose they will need something like a "witness protection" plan for all you voted for this travesty. And God help those who voted for it. I seldom, in 63 years, found myself this angry at anything my government has done. We've been sold done the river! Joey45

October 3, 2008 at 9:41 pm

Mary Howard

I feel as if I am in mourning right now, once again our elected representitives knew how we felt and voted the opposite way. Make no mistake, we are in for tough times such that most of us have never seen. We are in real trouble. I feel though (very strongly I might add) THIS BILL IS NOT THE ANSWER!!! I have worked hard my whole life and put myself through college, Saved money in my 401k, and other than my house, I am debt free. So why should I pay for greed and bad debt? Did people not realize a variable loan could go up in interest as well as down? Socailized Banking Thats just great! Too bad Dr Pauls warning fell on deaf ears

October 3, 2008 at 9:39 pm

MichiganJack

Thanks for giving space to the writings of this great man, Ron Paul -- the only White House candidate this year who understands economics. With passage of the so-called $700 billion bailout bill, I just hope his admonitions are not getting attention too late to do any good.

October 3, 2008 at 9:32 pm

Janette Garside

Please help us... what can we do? I have thought that perpahps that all of Main Steet can send our Bills and loses to the Government and ask for a bail out.rescue. It would be unconstituional if they would deny us the right. I am angry but I don't want these feelings to just go away un justifed. What legal things can Main Street do? Then we could have main street heard......

October 3, 2008 at 9:32 pm

John

Is there any wonder anymore why Ron Paul has such a devoted following unlike any politician of today? "Banking establishments (The Federal Reserve) are more dangerous than standing armies." -Thomas Jefferson

October 3, 2008 at 9:32 pm

Aaron

I wish there were a few more Americans who didn't feel content being ignorant. I think there are too many Americans who are happy enough to hear someone say they'll fix it, whether or not they even have a clue. People like Ron Paul try to get the word out, and most other people call them crackpots. Things aren't getting better, and our money gets stretched thinner and thinner as the government spends more and more fake money, making the green bills in my wallet worth less (worthless?). I don't know how it will end, but it doesn't look good.

October 3, 2008 at 9:32 pm

MichiganJack

Glad to see Ron Paul's thinking finally getting more exposure. He alone addressed these issues in the primaries, and he alone among current and former White House candidates understands economics. He and some supporters have been calling for a collapse of our house of cards for some time, so it's disturbing to read now that he thinks the bailout's benefits will fade soon. I join Dr Paul in hoping he is wrong.

October 3, 2008 at 9:27 pm

John

Ron Paul has been telling people for years and years about this, and finally people are starting to listen to him. I hope it's not too late, as many have said lately "privatizing gains and socializing losses", as in forcing the tax payer to bail out yet again more millionaires and corrupt leadership. It's very saddening to see what is happening in America and they way things look, even with the bailout, more hardship is coming and we'll probably be in this rut for 10 years or more. Dr Paul's ideas and testimony would have allowed the markets to succeed and fail as they do business. That is perfectly normal. Every business carries risk, it's how the people at the top deal with those risks. Many have failed by taking on more risk then they could handle. The tax payer is a dying breed. The tax payer is at the mercy of governement who helps bail out these failed businesses by forcing us, the tax payer to pay for their mistakes, or even worse, their corruptness.

October 3, 2008 at 9:10 pm

nkleffman

Way off on the books he wrote. The Case for Gold yes, but the other two? Challenge to Liberty was written by Herbert Hoover and A Republic, If You Can Keep It is by Earl Warren. How about plugging his newest book, New York Times bestseller, The Revolution: A Manifesto.

October 3, 2008 at 9:10 pm

Kelly Pope

Hey... great... thanks for coming out in favor of Dr. Paul AFTER the vote has gone through. How daring of you. You... you... REBEL!!!

October 3, 2008 at 9:05 pm

Marc

"Ron Paul is an economic genius" - Neil Cuvoto

October 3, 2008 at 9:00 pm

Courtney

It's nice to see this article. The more people that understand the root of the problem we're in, the sooner we can actually do the right thing -- and this bailout is NOT the right thing.

October 3, 2008 at 8:58 pm

liz

Ron Paul is a man among mice and a time will come when everyone will wish they had listened to him before it was too late. He's a hero in my book and my admiration for him knows no bounds. He's absolutely right of course which makes it even sadder that he's been riduculed instead of listened to.

October 3, 2008 at 8:57 pm

DRUMZ

Nice article. Too bad more journalists weren't quick, or smart enough to catch on to Paul's message when it mattered... before the media anointed McCain as the Republican nominee.

October 3, 2008 at 8:57 pm

Elaine

To a man (or woman) the congressmen and women who spoke admitting they would be voting YES on the bailout, promised to work to 'fix' the bill when they came back in session. I don't know what happened to the promise at the beginning that they were going to take the time to 'do it right', but they passed a horrendous pork-filled bill in haste! They should now go to the congressmen who had the knowledge of the financial crisis and the patriotism and fortitude to stand up for what is right and vote NO, and ask for their input. Of course, we know they have no intention of fixing it, as the 'fix' is in and many of them are profiting from the bailout.

October 3, 2008 at 8:52 pm

Al Benton

WISH HE HAD STAYED IN THE RACE FOR PRESIDENT!

October 3, 2008 at 8:52 pm

Barry Donegan

I wonder if it hurts Ron Paul being so right all of the time. He is the Cassandra to our Troy. Cursed to always be right, but for no one to listen to him.

October 3, 2008 at 8:51 pm

American Taxpayer

Every representative that voted for this bill should be tried for treason. Or at the very least, thrown out of office immediately.

October 3, 2008 at 8:49 pm

Adam1mc

Too bad Ron Paul couldn't have been heard more during the Presidential debates. He was warning of this collapse while the MSM and other political puppets laughed. He has been warning us. We don't need bailouts, we need to cut spending. End the unconstitutional Iraq war, bring our troops home. End the unconstitutional drug war. Tax and profit from the Country's leading cash crop. And we also need to eliminate the unconstitutional Government programs like Sarbanes Oxley, Patriot Act, Homeland Security to cut costs there as well. The FED was created to PREVENT market crashes like we are witnessing. They have obviously FAILED at that task. We need to eliminate the FED. Until we address these issues that Dr. Paul has warned about, we will continue down this downward spiral.

October 3, 2008 at 8:49 pm

Gary Driscoll

I am wondering when people will figure out the the mortgage-backed securities behind the current "crisis" are the BEST of the trillions of dollars worth of derivatives on banks and companys' books.

October 3, 2008 at 8:47 pm

Marion Akins

I am a US citizen living in Canada, and feel a great deal of despair and hopelessness over the direction the United States has been taken for some time, especially under the leadership of George W Bush. Ron Paul seems to be one of very few voices of sound reason regarding the current state of affairs in the United States. He is very pragmatic, knows his facts, and is truly concerned about getting the United States back on track that will be beneficial for all of its citizens, and not just for the interests of large corporations and the good ole boys in charge of the print press for the US greenback. Too many congressmen and senators are bought and paid for by the strong lobby groups, and this will continue unless they keep getting voted out of office. The only things that will change the current direction is if every one of them that voted for the bail out package are voted out of office on November 4. Then, things may start to change, but it will require vigilance on the part of every citizen to be watchful for the actions of the next ones that get voted in. We are headed into a time of great turbulence that could be allayed to some degree if we start running our country like a family runs its household... there is a finite budget and the family cannot spend beyond what it can afford. Unfortunately, the banks have encourgaged bad financial behaviour for families in the United States, which is one of the contributing factors for the current financial mess. If Ron Paul was a write in candidate, I would be voted for him, but unfortunately he is not, so I will be voting for one of the write in candidates that he has endorsed. The United States needs the leadership of someone like Ron Paul to help guide the way into the future... without this pragmatic guidance, I truly fear for the future of the United State of America. God Bless America.

October 3, 2008 at 8:46 pm

Gina

Ron Paul is a genious...absolutely...and those of us who knew this earlier were trying to tell everyone...but the feds and big banks speak more loudly than we do with their printing presses....You Go Ron Paul

October 3, 2008 at 8:43 pm

about this blog

  • Elizabeth MacDonald is the stocks editor for Fox Business Network. She is recognized as one of the top prize-winning business journalists in the country, and has received 14 awards, including the top prize in business journalism, the Gerald Loeb Award for Distinguished Business Journalism, and the Newswomen's Club of New York Front Page Award for Excellence in Investigative Journalism.

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