A sound voice about the Debt debacle.

Because I think this hits at the heart of economic concern in the U.S. I feel obligated to share with any readers willing to work toward a better tomorrow! -James




August 1, 2011

ALEXANDRIA, Virginia - Today, 2012 Republican presidential candidate Ron Paul issued a statement outlining his opposition to the debt ceiling deal struck between the White House and Congress. See statement below.

"While it is good to see serious debate about our debt crisis, I cannot support the reported deal on raising the nation's debt ceiling.  I have never voted to raise the debt ceiling, and I never will.

"This deal will reportedly cut spending by only slightly over $900 billion over 10 years.  But we will have a $1.6 trillion deficit after this year alone, meaning those meager cuts will do nothing to solve our unsustainable spending problem.

"In fact, this bill will never balance the budget.  Instead, it will add untold trillions of dollars to our deficit.  This also assumes the cuts are real cuts and not the same old Washington smoke and mirrors game of spending less than originally projected so you can claim the difference as a ‘cut.'

"The plan also calls for the formation of a deficit commission, which will accomplish nothing outside of providing Congress and the White House with another way to abdicate responsibility.

"In my many years of public service, there have been commissions on everything from Social Security to energy policy, yet not one solution has been produced out of these commissions.

"By denying members the ability to offer amendments and only allowing an up-or-down vote that will take place in the hectic time between Thanksgiving and Christmas, this Commission essentially disenfranchises the vast majority of members from meaningfully participating in the debate over reducing spending and balancing the budget.

"Furthermore, despite the claims of the bill's proponents, there is nothing to stop the commission from recommending tax increases.

"One of the reasons why I humbly suggest that I am the most qualified Presidential candidate is my experience to see and understand the long track record of failure, disappointments, and bad recommendations made by such commissions.

"Times like these require statesmanship and steady leadership, which I and the grassroots activists who have joined my campaign believe I am uniquely qualified to provide.

"What should bother Americans most is that under cover of this debt ceiling circus, we learned from a recent GAO one-time, limited audit that the Federal Reserve secretly pumped $16 trillion into American and foreign banks over three years.  All of the Fed's fat cat cronies were taken care of at the expense of the American public.

"To put that into perspective, our entire national debt is $14.5 trillion, and our annual deficit will be about $1.6 trillion, meaning the Federal Reserve created and appropriated more than our entire national debt to banks around the world in a few short years.  We have been fighting in Congress these past few weeks over raising our debt ceiling by $2 trillion, an amount the Fed secretly gave away to just one big bank.

"For decades, politicians have promised future restraint in exchange for hikes in the debt limit.  We are always told that we must act immediately to avoid a crisis.  But time and time again, politicians reveal themselves to be untrustworthy, and we soon find ourselves in a crisis being led by the same folks who wish only to maintain the status quo.

"I believe in the great American traditions of free markets, sound money, and personal Liberty.  But we are moving far away from what made us the greatest nation in human history. We must cut spending and balance our budget now, before it is too late.

"Let me be clear.  The cuts we must make will not be easy, and there will be difficult times in the short run.  But I have the greatest confidence that if we come together as a People, work hard, and do the right things, our country will be back on track in no time and on its way to unprecedented prosperity.  But, if we continue to print money and pyramid debt, we will destroy ourselves and lose the promise of America forever.

"These difficult times require a President willing to stand against runaway spending.  If elected, I will veto any spending bill that contributes to an unbalanced budget, and I will balance the budget in the first year of my term.  I will not allow the Federal Reserve to destroy the value of our money by shoveling dollars into the pockets of its banker friends.

"I remain committed to working on behalf of the American people to drastically reduce spending and implement fundamental changes that will reform government and restore our nation's prosperity."

Debt Ceiling

Well it's all over the news and radio, every where you look and seemingly just about every half an hour here in the U.S.  I don't have much to say on this really, the whole idea of what our country has done to get into this situation is appalling and really it would seem to me all the most likely to happen scenarios are just ways to "kick the can down the road for the next guy".  There is one idea that I have heard Ron Paul mention that I really like which is to just wipe clean our debt to the federal reserve, I mean if you think about it a little that is like taking a loan out against our own savings and then paying the bank interest to do that...  Currently the majority of our debt is in this form and it could be a great first step in a general corrective course.

Now remember how I have mentioned that our currency is in fact a representation of debt, this would cause a very interesting scenario that would likely be of great benefit to everyone.  The act of wiping the slate clean of our own debt to ourselves as a nation would instantaneously deflate dollar values, as the volume in circulation would shrink, to what level is really up to the market but I suspect it would not be noticeable just not huge.  The net effect would appear that corporations would be making more profits, workers more money because the dollar has greater spending power and prices would be cheaper.... sadly it couldn't work quite like that because either workers would need to have a pay reduction (very tough thing to accomplish psychologically) or corporations profit levels would have to drop and the initial effect would likely be the latter followed by a gradual normalization of salary.

This scenario while sounding very radical has been done before as a way to help recover from the effects of defaulting on external debt....  yes that is right there is a recent example of exactly the same thing the U.S. is going through now from the start and well into recovery, ( see the story of the second Mexican peso for more info ) Mexico defaulted on it's "external" debt which caused a lot of capital to flee the country encouraging significant amounts of inflation and poverty, as a part of their recovery plan Mexico created the New Peso, essentially a new REPLACEMENT currency to be valued at 1/1000 of the original peso.  This greatly helped to bring back stability in the Mexican currency and their economy has been performing very well as a leader among the Latin American economies.

So given we have a blue print of what could happen if the U.S. govt. defaults on its external debts and how we might be able to recover.... does it not sound like the "radical" stop-gap that Ron Paul proposed could be a way to help put more money in our pockets, avert the near term problem without making matters worse and give us more time to completely make this problem obsolete?  Seems like a win-win to me...  What do you think?