Why is the Federal Reserve’s manufacturing of fiat money the true cause of high oil prices?
*Texas Straight Talk, by Congressman Ron Paul, June 9, 2008:
"Rising Energy Prices and the Falling Dollar
Oil prices are on the minds of many Americans as gas hits $4 a gallon,
and continues to surge. How high can prices go? How can we
solve these problems? What, or who, is to blame?
Part of the answer lies in understanding bubbles and monetary
inflation, but especially the Federal Reserve System. The Federal
Reserve is charged with controlling inflation through interest rate
manipulation, however, many fail to realize that creating money, and
therefore inflation, is really its only tool. When the Federal
Reserve inflates the dollar as drastically as it has in the past few
decades, the first users of the newly created money go in search of
investments for their dollars. They must invest this money
quickly and aggressively before it loses value. This causes
certain sectors to expand beyond what would naturally occur in the free
market. Eventually the sector overheats and the bubble
bursts. Overinvestment in dotcoms eventually led to a collapse of
the NASDAQ. Next we had the housing bubble, and now we are seeing
the price of oil being bid up in the creation of another new
bubble. Investors are now looking to commodities like oil, for
stability and growth as they pull capital out of real estate.
This increased demand for investment vehicles related to oil
contributes to driving up the price of the actual product.
If the Fed continues with its bubble blowing policies of the past, the
new commodities bubble will continue to grow, gas prices will continue
to go up, as the value of your dollars go down. We will see an
overinvestment in these commodities as solutions are desperately sought
for a supply shortage, which is only part of the problem. Make no
mistake, though, this is not the free market at work. Government
manipulations have added levels of complication and unintended
consequences to the marketplace.
This is not the time for members of Congress to take political potshots
at each other, or to imagine that the free market is somehow to
blame. This is the time to understand and fix problems.
That begins with making sure the decision makers have a firm grasp on
the causes of the problems and possible effects of their
decisions. This is absolutely crucial if we want to get it right
this time. That is why I am in the process of calling for
hearings on Capitol Hill on how the falling value of the dollar affects
energy prices.
Governments need to get out of the way and let the people get back to
work so that we can get our economy back on stable footing. Our
destructive regulatory environment, confiscatory tax policies, and
managed, rather than free trade have chased many businesses
overseas. The bottom line is average Americans are being
seriously hurt by these flawed policies, and they are not getting good
information about the true dynamics at work. The important thing
now is to get the diagnosis absolutely correct so we can administer the
appropriate treatment and move on to a healthier economic future. To do
this it is absolutely necessary to address the subjects of central
banking and fiat money."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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