Is the Fed enabling out of control government spending, leading to inflation?
*Texas Straight Talk, by Congressman Ron Paul, March 29, 2010:
''With passage of last week’s bill, the American people are now the
unhappy recipients of Washington’s disastrous prescription for
healthcare 'reform.' Congressional leaders relied on highly
dubious budget predictions, faulty market assumptions, and outright
fantasy to convince a slim majority that this major expansion of
government somehow will reduce federal spending. This legislation
is just the next step towards universal, single payer healthcare, which
many see as a human right. Of course, this 'right' must be
produced by the labor of other people, meaning theft and coercion by
government is necessary to produce and distribute it.
Those who understand Austrian economic theory know that this new model
of healthcare will cause major problems down the road, as it has in
every nation that ignores economic realities. The more government
involves itself in medicine, the worse healthcare will get: quality of
care will diminish as the system struggles to contain rising costs,
while shortages and long waiting times for treatment will become more
and more commonplace.
Consider what would happen if car insurance worked the way health
insurance does. What if it was determined that gasoline was a
right, and should be covered by your car insurance policy?
Perhaps every gas station would have to hire a small army of
bureaucrats to file reimbursement claims to insurance companies for
every tank of gas sold! What would that kind of system do to the
costs of running a gas station? How would that affect the prices
of both gasoline and car insurance? Yet this is exactly the type
of system Congress is now expanding in health insurance. In a
free market system, health insurance would serve as true insurance
against serious injuries or illness, not as a convoluted system of
third party payments for routine doctor visits and every minor illness.
While proponents of this reform continue to defy all logic and reason
by claiming it will save money, I worry about cataclysmic economic
events. Already investors are more reluctant to buy US
Treasuries, fearing that the healthcare bill, along with other
spending, will cause government debt to explode to default
levels. I had the opportunity last week to address my concerns
with both Treasury Secretary Timothy Geithner and Federal Reserve
Chairman Ben Bernanke, especially about the potential for the coming
serious inflation. I am not optimistic that these important
decision makers truly understand what is coming, why it is coming, and
how best to deal with it.
The Federal Reserve finds itself in an unprecedented and unenviable
position. To keep up with government spending and corporate
irresponsibility, it has increased the monetary base by nearly $1.5
trillion since September of 2008. Excess bank reserves remain at
historically high levels, and the Fed's balance sheet has ballooned to
over $2 trillion. If the Fed pulls this excess liquidity out of
the system, it risks collapsing banks that rely on the newly created
money. However, if the Fed fails to pull this excess liquidity
out of the system we risk tipping into hyperinflation. This is
where central banking inevitably has led us.''
*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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