Posted by Matt Hawes on 02/02/09 1:07 PM   [Newer: Re: Mass Action Day] [Older: Re: John Tate Interview]

Dr. Paul's latest Texas Straight Talk:

I have recently had several opportunities on various news programs to discuss the economy and what is wrong with the so-called economic stimulus package. I have said over and over what we shouldn't be doing, and now I'd like to explain what we should be doing.

But to improve the situation, you must first have a solid grasp of how we got here. Government policies and central planning created the housing bubble, now going bust. About a decade ago the government made expanded homeownership and affordable housing a public goal. Through Fannie Mae, Freddie Mac and the secondary mortgage market the government incentivized creative, low down-payment, more widely available mortgage products, and discouraged the market-proven lending standards of the past. The Federal Reserve kept interest rates artificially low, which added more fuel to this fire. Many related sectors temporarily flourished because of this, and many people got into homes they otherwise could not have afforded. The increased demand for housing sent prices soaring until in many markets housing became even more unaffordable, necessitating even more creative mortgages, and impossibly leveraging homeowners. Many risky investment vehicles such as mortgage-backed securities, derivatives, credit default swaps grew out of this unsustainable situation. As the foreclosures began, the house of cards started to tumble. Too many people have confused the symptoms and the pain of the bust with the problematic policies that caused the bubble, which is really what needs to be treated.

First of all, just as the best cure for a hangover is not to drink so much, the best cure for a recession is a recession. It is time to sober up and return to free market sanity, risk and reward, supply and demand, without political intervention. Politicians are good at catering to the needs of special interests, but very bad at determining what needs to take place in the market. Government should stick to punishing fraud and enforcing contracts. When they use the tax code, bureaucratic departments and their manipulative rules and regulations to dictate social and economic behavior, we end up with distortions and malinvestments. Bailing out banks, continuing failed Fed policies and strapping the taxpayer with toxic debt will worsen the pain, and punish the innocent.

If Congress really wanted to do something helpful, it would cut taxes. Ideally, we would repeal the income tax altogether and get the IRS off the economy's back, which would be a huge boon. We should also cut spending. Cut every unconstitutional department and program, every wasteful governmental encroachment on the people's liberty and money, starting with our massive overseas empire. The cost of our empire is bringing us to our knees, just as the Soviets' empire did to them. Congress should also abolish the Federal Reserve and take back its responsibilities to ensure sound money, safe from the manipulations of powerful banking interests.

These things would constitute real change, real economic stimulus. The plans being bandied about Washington are just more of the same. As long as no one seriously considers the cure, we are unfortunately destined to prolong the disease.

Posted 02/02/09 1:39 PM katwoman Mendon, VT

I now this is petty and I agree with Dr Paul about nearly thing but I have to comment on this statement: "First of all, just as the best cure for a hangover is not to drink so much, the best cure for a recession is a recession." IMHO this analogy is rather poor since everyone knows the best cure for a hangover is the hair of the dog that bit you which follows logically with the recession is a recession portion of his statement. Unfortunately, if we follow this same logic which I am sure all the drunks in congress are doing right now we could also conclude that the cure for over spending is to spend some more!! That said, I would have chosen a more suitable less assailable analogy.

Posted 02/02/09 1:52 PM Fu Manchu Belleville, MI

Yes but if you follow the hair of the dog logic, what do you become? An alcoholic. I think the analogy works.

Posted 02/02/09 4:47 PM Broadlighter Santa Cruz, CA

Maybe not the best choice of analogies, but I think his meaning is that we learn better by fully experiencing the pain of recession. Let the people put the pieces of a broken economy together through their own voluntary choices. The problem with the statists in government is that they believe we are not smart enough, creative enough or resourceful enough to solve our own problems. They believe that only the government can fix the economy. This is the kind of wrong-headed thinking we need to reject and my most optimistic hope is that the government stimulus will lead to such rejection.

Posted 02/02/09 7:31 PM Scott D Chicago, IL

Tonight on Kudlow (CNBC) I saw an interview with Rick Santelli where they breifly discussed a new credit default swap market for US treasuries. That's right, an insurance policy you can buy to protect against the default of a US Treasury Bill. How could that be even possible when the government guarantees it? Does the market know something about our government that we don't? Watching shows like Kudlow on CNBC make me believe the Wall Street croud is starting to get annoyed with all of this bailout and "bad bank" business. They really aren't comfortable with nationalization and want to get back to free markets. Even that guy Dylan Radigan who gave Dr. Paul such a hard time on MSNBC last week is making cynical comments about nationalizing the banks on his show Fast Money. Keep up the great work you are doing with this media blitz Dr. Paul. The message is getting out there and the cracks in the Keynsian planned economy are beginning to show.

Posted 02/02/09 7:31 PM BruceKoerber Cedar Rapids, IA

February 2, 2009 Cut Every Unconstitutional Department And Program! "Cut every unconstitutional department and program!" Now there is a proposal that abides by the rule of law! It is a scientific fact that intervention into the economy is immoral, lacking all moral authority. What is apparent, then, is that the 'system of justice' imposed on us is corrupt. Otherwise the rule of law would be the basis of all policy and the usurpers of moral authority would be identified as frauds and made to be social outcasts.

Posted 02/03/09 08:29 AM tb54701 Eau Claire, WI

"Cut every unconstitutional department and program!" For those of us new to all this information,, and believe me, I'm reading a ton... could someone list these departments?? I would like to research this further for debate material... I know the Dept of Education is always mentioned... tks

Posted 02/03/09 09:25 AM websmith Morgan Hill, CA

This better stimulus plan will also work. http://ewebsmith.com/finance/betterstimulus.html As will this one. http://halturnershow.blogspot.com/2009/02/new-hampshire-talks-civil-war-ag ainst.html

Posted 02/03/09 10:17 AM celticreeler Rolla, MO

The government is such a big employer, its survival in its current state of morbid obesity is guaranteed, since no one votes to abolish his own job. What I fear is that a total collapse is the only way it's going to happen.

Posted 02/03/09 11:21 AM gride huntington beach, CA

pdf for some cheap and easy to print and distribute handouts? http://thepressurecooker.com/files/TST_01052009.pdf

Posted 02/03/09 11:22 AM gride huntington beach, CA

sorry that should be http://thepressurecooker.com/files/TST_02022009.pdf

Posted 02/04/09 10:08 AM hmr 85 Portland, OR

I agree with the comments made. I'm affraid the possible collapse of the dollar might be the only way to make Americans wake up. But we must not let that discourage the cause for liberty and a free market, etc.

Posted 02/04/09 2:25 PM WEZ4REAL73 Loganton, PA

I agree with Dr.Paul's comments. The 16th Admendment has been paying for the "New World Order "for years.Along with our economy the World economy is failing. Can anyone see that one World monetary system is on the horizon.