October 14, 2008 - By True Patriot and Congressman
Ron
Paul
It has been long understood that our federal government is
going deeper into debt, consistently raising the debt ceiling
and demonstrating no fiscal restraint. In recent years, debt
ceiling increases have been placed in “must pass” legislation
as a means to guarantee that Republicans as well as Democrats
would vote for them when Congress was under Republican control.
We also know our nation’s “negative savings rate” reflects
the habits of private citizens, showing those habits to be
not tremendously different than the habits of the public sector.
Yet, the signs of decline are becoming ever more apparent.
So apparent, in fact, that it seems unlikely that bailouts
or other gimmicks will have even short term success. More inflation,
and creating moral hazard by bailing out egregious offenders,
is a recipe for disaster. These activities can seem to provide
some short term relief, but it seems we are now at a significant
crisis point, where monetary policy gimmicks don’t provide
the band-aids they did in the past.
Not only is our nation on the verge of bankruptcy, but so
are its people and private institutions. We are now repeatedly
hearing about businesses “needing to access the credit
market to make payroll.” This is an unmistakable sign
of more dire consequences ahead for the economy. If businesses
must borrow just to make payroll, this is evidence of a severe
undercapitalization that cannot be sustained, even for the
short run.
Couple these facts with items such as the explosion of the “pay
day loan” industry and the unmasking of the false sense
of economic well-being is nearly complete. These pay day loan
companies use preferred access to easy credit to inject cash
into the hands of the working poor. They are nearly always
set up in lower-income neighborhoods. These people, who are
struggling to buy food and pay rent, get addicted to the credit
drug. Their standard of living is only further depressed by
the interest payments on these loans that make them profitable
to their providers. Thus, the recipients are left even less
capable of paying for items such as food and housing in the
long run, without using this credit again and again.
These people are often the very ones being paid by businesses
who “borrow to make payroll.” This is the dark
underbelly of the fiat money, borrow and spend economy this
nation has been building. As the government takes over more
and more functions of the economy many see the rise of socialism
as an antidote to this failure of “capitalism”.
However, the fact remains that our economy has been increasingly
running on debt, not capital. Capitalism does not exist without
capital and debt is not, has never been and will never be a
form of capital. Only now are we seeing the more dire implications
of an economy without capital.
Read more Articles by Ron Paul at http://www.house.gov/paul/legis.shtml
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