Opening Statement: House Committee On Financial Services, Monetary Policy And The State Of The Economy
REP. RON PAUL (R-TX); Thank you, Mr. Chairman. And welcome, Chairman Bernanke.
I share the concern for the inequality that has developed in our country. I think it's very real. I think it's a source of great resentment, and unfortunately, I think it's one of those things that puts a lot of pressure on the Congress to increase the amount of government programs and government spending, which I do not think is the answer.
I believe the inequality comes specifically from the type of currency we have.
When there is a deliberate debasement of a currency, it is predictable that the middle class is injured, the poor are hurt, and there's a transfer of wealth to the wealthy. And until we understand that, I do not believe we can solve this problem. And if we resort to continued monetary inflation, more government programs, we will only make this inequality worse. This is exactly opposite of what happens when you have a sound currency and free markets, because it is a sound currency and free markets which creates the middle class and creates prosperity.
Inflation is a monetary phenomenon. It comes from the Federal Reserve system. The Federal Reserve has tremendous pressure put on them because almost everybody wants low interests, except if you happen to be a saver, then you might not like artificially low interest rates. But, of course, that contributes to the lack of savings, which is another problem that we have in this country. We concentrate on inflation by implying -- and everybody casually accepts that inflation is a price problem, that the prices that go up is one of the consequences of inflation, inflation causes the mal investment, it causes excessive debt, and it causes financial bubbles that we have to deal with. But we have a lot of information today available to us to show that there's a lot of monetary inflation going on. For instance, if you look at MZM, it's growing at almost a 9 percent rate. M3 -- no longer available to us from the official sources, but private sources tell us it's growing at a 13 percent rate. Of course we can reassure ourselves and say the CPI is growing at a 2.6 percent rate. But if you go back to the old method of calculating the CPI, closer to what the average person is suffering, and one of the reasons why there's an inequality going on is it's growing at over a 10 percent rate.
The fact that the dollar is weak on the international exchange markets cannot be ignored. For instance, just in six months, the Canadian dollar increased 11 percent against our dollar. This should stir up some concern.
One concern that I have that I think is causing more problems and keeps us from coming to a solution is the divorce between the exchange value of the dollar on international exchange markets and the effort to lower the value of the dollar in order to increase exports, which can only be done through inflation; at the same time believing that we can have stability in prices at home, because that is a disconnect that is not possible. If we strive for a lower dollar in the exchange markets, we will have price increases here at home and we have to deal with it.
And I yield back.