The growth in money and credit has outpaced both savings and economic growth. These inflationary pressures have been concentrated in asset prices, not consumer price inflation--keeping monetary policy too easy. This increase in asset prices has fueled domestic borrowing and spending. Government policy and the increase in securitization are largely responsible for this bubble. In addition to loose monetary policies by the Federal Reserve, government-sponsored enterprises Fannie Mae and Freddie Mac have contributed to the problem. The fourfold increases in their balance sheets from 1997 to 1998 boosted new home borrowings to more than $1.5 trillion in 1998, two-thirds of which were refinances which put an extra $15,000 in the pockets of consumers on average--and reduce risk for individual institutions while increasing risk for the system as a whole.
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CONFERENCE REPORT ON S. 900, GRAMM-LEACH-BLILEY ACT, November 8, 1999Ron Paul
Economic and monetary union...is incompatible with independent sovereign states with control over their own fiscal and monetary policies. It would be impossible...to have irrevocably fixed exchange rates while individual countries retained independent monetary policies...such a system could never have the credibility necessary to persuade the market that there was no risk of realignment. Thus EMU inevitably implies a single European currency, with monetary decisions...taken not by national Governments and/or central banks, but by a European Central Bank. Nor would individual countries be able to retain responsibility for fiscal policy. With a single European monetary policy there would need to be central control over the size of budget deficits and, particularly, over their financing. New European institutions would be required, to determine overall Community fiscal policy and agree the distribution of deficits between individual Member States...It is clear that Economic and Monetary Union implies nothing less than European Government...and political union: the United States of Europe. That is simply not on the agenda now, nor will it be for the forseeable future.
Nigel Lawson
Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. ... A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society.
Milton Friedman
Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans. Despite the long-term damage to the economy inflicted by the government’s interference in the housing market, the government’s policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.
Ron Paul
Tax revenues are up 59 percent since 1980. Because of our economic growth? No. During Carter's four years, we had growth of 37.2 percent; Reagan's five years have given us 30.7 percent. The new revenues are due to four giant Republican tax increases since 1981. All republicans rightly chastised Carter for his $38 billion deficit. But they ignore or even defend deficits of $220 billion, as government spending has grown 10.4 percent per year since Reagan took office, while the federal payroll has zoomed by a quarter of a million bureaucrats... big government has been legitimized in a way the Democrats never could have accomplished. It was tragic to listen to Ronald Reagan on the 1986 campaign trail bragging about his high spending on farm subsidies, welfare, warfare, etc... the IRS has grown bigger, richer, more powerful, and more arrogant. In the words of the founders of our country, our government has "sent hither swarms" of tax gatherers "to harass our people and eat out their substance." His officers jailed the innocent George Hansen, with the President refusing to pardon a great American whose only crime was to defend the Constitution. Reagan's new tax "reform" gives even more power to the IRS. Far from making taxes fairer or simpler, it deceitfully raises more revenue for the government to waste... I want to totally disassociate myself from the policies that have given us unprecedented deficits, massive monetary inflation, indiscriminate military spending, an irrational and unconstitutional foreign policy, zooming foreign aid, the exaltation of international banking, and the attack on our personal liberties and privacy.
Ron Paul
The central idea is that government fiscal policy, its spending and taxing, its borrowing and repayment of loans, its issue of new money and withdrawal of money, shall be undertaken with an eye only to the results of these actions on the economy and not to any established traditional doctrine what is sound and what is unsound ...Government should adjust its rates of expenditure and taxation such that total spending is neither more or less than that which is sufficient to purchase the full employment level of output at current prices. If this means there is deficit, greater borrowing, "printing money," etc., then these things in themselves are neither good or bad, they are simply the means to the desired ends of full employment and price stability.
Abba Lerner
Paul, Ron
Paul, Vincent de
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