ron paul questions greenspan

  1. 5,881 Posts.
    Exchange between Ron Paul & Alan Greenspan...
    Representative Ron Paul: "Mr. Greenspan, yesterday you were quoted as saying it was imperative that the Congress restore fiscal discipline. And of course you've made that point, I think, very often over the years. I have tried my best to vote accordingly, but sometimes I find myself in a lonely category.

    I have found that we have a group here that is quite willing to vote for deficits for domestic programs. Then we have another group that's quite willing to spend for militarism abroad. Then we have another group that likes both. So if you look around for people who are willing to maybe cut in both areas, it's pretty hard to come by.

    But you, in the past, in answer to some of my questions have answered that you believe that central bankers have come around to getting paper money to act in many ways just like gold, and therefore, there was less of an imperative for a gold standard. I haven't yet been convinced of that.

    Take, for instance, the current account deficit. You know, under a gold standard there's a lot of self-adjustment. And we certainly wouldn't have the exchange rate distortions between the renminbi and the dollar. So I think there's a lot of shortcomings under the paper standard with the current account deficit.

    Also, although the argument is made that the CPI reflects that there's little or no inflation, that if you look at the price of bonds or if you look at the cost of medicine, if you look at the cost of energy, there's a lot of price inflation out there. And also, if you look at the cost of houses, which are skyrocketing, which then is reflected into tax increases, the consumer is still suffering from a lot of price inflation that we in many ways in Washington try to deny.

    But I think in an effort to discipline the Congress that the Federal Reserve would have a role to play as well, because in many ways the Federal Reserve accommodates the spending because you're capable of buying bonds, and when you buy our debt that we create, you do it with credit it out of thin air. So it is that facility of the monetary system that literally encourages or actually tells the Congress they don't need to be disciplined because there's always this fallback, that we don't have to worry, the money's out there, which would not be available, obviously, under a gold standard. But I would like to quote from a famous economist that sort of defends my position. It says -- he says, 'In almost a hysterical antagonism toward the gold standard, is one issue which unites statists of all persuasions. Government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds.'

    Further stating: 'In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statist antagonism toward the gold standard.' And, of course, I'm sure you recognize those words because this is your argument."

    Mr. Greenspan: "I do."

    Representative Ron Paul: "And I would say that isn't it time -- if we ever get concerned about our deficit spending, and we've considered a real imperative, why shouldn't we talk about serious monetary reform? Do you think that the gold standard would limit spending here in the Congress?

    Mr. Greenspan: "First of all, that was written 40 years ago, and I was mistaken, in part. I expected things that didn't happen. And nonetheless, my general view towards the type of gold-standard effect remains to this day -- my forecast of what was going to happen subsequent to that period has proved, fortunately, wrong. And as I said to you in the past, we have tried to manage the Federal Reserve over the years, really since October 1979 - because remember, up to that point we were in some very serious inflationary trouble -- since then I think we have been remarkably successful, in my judgment.

    And while I still think that the gold standard served us very considerably during the 19th century, and mimicking much of what the gold standard does is what we do today, I think in that context so far we have maintained a stable monetary system. And I do not think that you could claim that [the] central bank is facilitating the expansion of expenditures in this country."
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