Ron Paul Saw This Financial Mess Coming Years Ago

[Paulie]

MinnPost - Ron Paul saw this financial mess coming

Ron Paul saw this financial mess coming

It's not like there wasn't anybody who saw the economic woes of the week on the horizon.

On Sept. 10, 2003, U.S. Rep. Ron Paul, R-Texas, testified before House Financial Services Committee, which was holding hearings regarding special privileges extended to government sponsored enterprises (GSEs). Think Fannie Mae and Freddie Mac. In his testimony. Paul criticized such privileges in general and warned of the potential for disaster posed by government involvement with Fannie and Freddie specifically.

Paul noted that according to the Congressional Budget Office, housing related GSEs received $13.6 billion in indirect federal subsidies in fiscal 2000 and had a line of credit with the United States Treasury exceeding $2 billion. That line of credit Paul said was an explicit promise by the Treasury to bail out GSE's in times of economic difficulty. (Sound familiar?)

"[The line of credit] helps the GSEs attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy," Paul testified. "Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a huge unconstitutional and immoral income transfer from working Americans to holders of GSE debt."

As Paul saw the situation some five years ago, the government backing isolated GSE management from market discipline. If Fannie and Freddie were not underwritten by the federal government, he told the committee, investors would demand the institutions held to higher management and accounting practices.

"Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market," Paul predicted. "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," Paul went on. "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.

"I hope today's hearing sheds light on how special privileges granted to GSEs distort the housing market and endanger American taxpayers," Paul concluded. "Congress should act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors who were misled by foolish government interference in the market."

On the same day, Paul introduced the "Free Housing Market Enhancement Act." The legislation would have removed government subsidies from the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the National Home Loan Bank Board. The bill had no cosponsors; it stalled in the committee process.

Paul argued that lower taxes and less government spending put more money in working people's pocket — pretty standard Republican line. But he also opined for bolder out-of-the-box actions calling for a sound monetary policy to increase the value of money and drive down the cost of living and a regulatory approach that is the inverse of what we're hearing from presidential candidates John McCain and Barack Obama.

In short, Paul's message is that money is the lifeblood of any economy, and control over a nation's currency means control over its economic well-being. Fed bankers quite literally determine the value of our money by controlling the supply of dollars and establishing interest rates. Their actions can make us richer or poorer overnight, in terms of the value of our savings and the buying power of our paychecks. How's that been working out for you lately?

Paul concludes his piece with a call to return to principle that is, perhaps, even more fitting today than earlier in the year.

"Unless we embrace fundamental reforms, we will be caught in a financial storm that will humble this great country as no foreign enemy ever could," he wrote. "We can find safe harbor in our ideals. Reclaiming our historic legacy of principled commitment to liberty will, once again, unleash the innovative spirit that propelled our nation to the heights of prosperity."

Yeah, what a kook.

He predicted this mess, and yet, was outcasted and marginalized. Now, we have two clueless idiots who are pretending to have the answers, when all the while, they ignored what was painfully obvious to those who actually had economic knowledge.

We had such better choices this year.

 

[editec]

So did I.

So did thousands of people.

What?

Ya'll think Ron Paul was the first American to get the scam of the Federal reserve or something?

He got that right enough, but as to his insight?

Old news, folks, very very old news.








It's

 

[Paulie]

So did I.

So did thousands of people.

What?

Ya'll think Ron Paul was the first American to get the scam of the Federal reserve or something?

He got that right enough, but as to his insight?

Old news, folks, very very old news.








It's

That YOU, or thousands of "others", saw it coming really doesn't mean much when viewed as a political issue. You and them aren't running for a major party's nomination. He was. He was the only one running that understood the root of our financial problem.

The one who actually spoke about what NOT to do, rather than what else we should intervene in. The man had SOLUTIONS. And that was why the media marginalized him.

You're telling me you'd rather have one of these two knuckleheads instead of a man of actual economic wisdom? I mean, it's not like he would have been able to cut many of the cabinet dept's he advocated cutting. He as CinC would have been able to do JUST ENOUGH without congressional approval to ACTUALLY fix some things. His Working Group on Financial Markets would have been staffed with REAL economists who understand the problems of today's monetary policy. There wouldn't have been this insane manipulation of markets, and there CERTAINLY wouldn't be a Treasury Secretary as wacked out as Hank Paulson is. That guy's got some serious screws loose.

Whatever though. Like I said, we had MUCH better choices than what we chose as a nation. But then, what's new?

 

[LordBrownTrout]

These two clowns running wouldn't know the meaning of simple economics and how to apply the constitution to our current financial mess to rid us of our problems if it hit them in the ass. I'm beyond sick of this defunct govt.

 

[Paulie]

Either one of the two main candidates advocate bailing out idiotic failing companies and passing the massive debt burden along to the next generation, who had NOTHING to do with the mess we're in, and had no say in how it should be handled. Our kids are going to inherit TRILLIONS of dollars of debt and deficits, because their parents didn't want to face the consequences of their own stupidity.

That ALONE loses them my vote.

 

[Neubarth]

Either one of the two main candidates advocate bailing out idiotic failing companies and passing the massive debt burden along to the next generation, who had NOTHING to do with the mess we're in, and had no say in how it should be handled. Our kids are going to inherit TRILLIONS of dollars of debt and deficits, because their parents didn't want to face the consequences of their own stupidity.

That ALONE loses them my vote.

As everybody can see, this proves that you do not have a clue about that which you are posting. There is no debt if we dismiss it.

 

[elvis]

newbarf diggin' thru the archives. gotta love it.

 

[Zona]

"Ron Paul Saw This Financial Mess Coming Years Ago"

Then why didnt he tell Bush to do something?

 

[elvis]

"Ron Paul Saw This Financial Mess Coming Years Ago"

Then why didnt he tell Bush to do something?

He probably did.

 

[Neubarth]

"Ron Paul Saw This Financial Mess Coming Years Ago"

Then why didnt he tell Bush to do something?

He probably did.

Ron Paul is an insane bantering fool that nobody takes seriously. He wants to put the US on the Gold Standard when there is not enough Gold in the world to back the US Dollar. The US dollar is backed by our productivity. We are the leading manufacturing country in the world.

 

[Neubarth]

newbarf diggin' thru the archives. gotta love it.

Just showing how totally insane Pauli is. He is so damn stupid, he is funny if you go back to these old posts of his.

 

[elvis]

"Ron Paul Saw This Financial Mess Coming Years Ago"

Then why didnt he tell Bush to do something?

He probably did.

Ron Paul is an insane bantering fool that nobody takes seriously.

so you're telling us that you are actually ron paul?