Ron Paul, 10.29.09, 09:20 AM EDT
Forbes Magazine dated November 16, 2009

The large-scale government intervention in the economy is going to end badly.

Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.

A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.

Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate. We have seen the results of Alan Greenspan’s excessively low interest rates: the housing bubble, the explosion of subprime loans and the subsequent collapse of the bubble, which took down numerous financial institutions. Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers.

This is nothing less than the creation of another bubble. By attempting to cushion the economy from the worst shocks of the housing bubble’s collapse, the Federal Reserve has ensured that the ultimate correction of its flawed economic policies will be more severe than it otherwise would have been. Even with the massive interventions, unemployment is near 10% and likely to increase, foreigners are cutting back on purchases of Treasury debt and the Federal Reserve’s balance sheet remains bloated at an unprecedented $2 trillion. Can anyone realistically argue that a few small upticks in a handful of economic indicators are a sign that the recession is over?

What is more likely happening is a repeat of the Great Depression. We might have up to a year or so of an economy growing just slightly above stagnation, followed by a drop in growth worse than anything we have seen in the past two years. As the housing market fails to return to any sense of normalcy, commercial real estate begins to collapse and manufacturers produce goods that cannot be purchased by debt-strapped consumers, the economy will falter. That will go on until we come to our senses and end this wasteful government spending.

Government intervention cannot lead to economic growth. Where does the money come from for Tarp (Treasury’s program to buy bad bank paper), the stimulus handouts and the cash for clunkers? It can come only from taxpayers, from sales of Treasury debt or through the printing of new money. Paying for these programs out of tax revenues is pure redistribution; it takes money out of one person’s pocket and gives it to someone else without creating any new wealth. Besides, tax revenues have fallen drastically as unemployment has risen, yet government spending continues to increase. As for Treasury debt, the Chinese and other foreign investors are more and more reluctant to buy it, denominated as it is in depreciating dollars.

The only remaining option is to have the Fed create new money out of thin air. This is inflation. Higher prices lead to a devalued dollar and a lower standard of living for Americans. The Fed has already overseen a 95% loss in the dollar’s purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year.

Ron Paul is a Republican congressman from Texas.
Forbes Magazine

Just so we are on the same page here, and given the new surge (once again) of fatalist doom and gloom: The World is NOT going to end.

Even if the US Economy crashes, the world is NOT going to end.
Even if there are eventually riots and uprisings because of the growing poverty, no, the world is NOT going to end.

Even if terrorists manage to detonate a nuke on US soil, the world is NOT going to end. Nukes have blown up cities in much weaker countries before and they survived, the United States will do so as well.

Why am I saying this? Because doom worshiping just isn’t helpful. It isn’t. It just disconnects you from the world around you and creates a distorted version of reality.

There’s enough bad news around to get us all worried. This blog itself, by the nature of the issues covered, revolves around current bad news and how to deal with them, the essential thing being, working on the solution, not getting absorbed by the problem.

The USA is heading for some rough times, it’s already going through them, and it’s just the beginning. Things will change, not Obama “change” but another kind that no a single person will like. But the end of the world? No people, I don’t think so.
Anything can happen. I mean, no one holds the crystal ball of divination. A meteor can blow us to pieces or a genetically boosted biological weapon may kill us all. It’s all within the real of possibility.

And then Britney Spears may one day go to med school, be good at it, and find the cure for cancer, but I doubt many of you will hold your breath on that one.

Empires have fallen. Terrible things have happened but the world has not ended.
You have Katrina, 9/11 and there are a thousand other events through out history that have been much worse. Learn from history folks, learn from previews events and come to your own conclusions.

There’s people that have been anticipating (promising?) the end of the world since the 60’s. Every decade or every couple of years there’s a new excuse, some new reason why the end of the world is just around the corner.

USA is heading for some rough times and people will adapt. They wont have a choice. Preparing for it will make such a process less painful, less of a surprise. But you don’t need all that negativity, you don’t need to run to the hills and hide in a hole fearing the boogieman.

Life will just go and those that fall for the doom and gloom will have a miserable existence while those that keep a positive attitude will have rich, enjoyable lives.

When things are ok you can afford to have a few affairs with depression and “the end of the world” mentality. But during hard times you don’t. When you lose your job and have to put food on the table and pay the bills, when you go looking for a job to do so and spend months getting up and going to job interviews, waiting in line along with 50 other candidates for jobs people didn’t even bother with before, you need all the positive mindset you can muster.

Doomers will find out how little fun all this is. Bills keep coming, food prices keep going up, the dentist and pediatrician still doesn’t accept a pair of handmade boots as form of payment, and well, Raiders never showed up, you never managed to make a living by scavenging the ruins of Walmart, or providing protection to a merchant caravan. It’s life as its always been, only worse regarding some aspects. Tougher and less forgiving… specially less forgiving regarding wrong decisions, buying stuff that was supposed to be worth “its weigt in gold” and that never happened, less forgiving regarding moving to that spot on the map that is just perfect regarding fallout charts and the less likely sport for Martians to land on… but lacks job opportunities, and most of the small towns near by will just go bankrupt and die during long term recession.

There’s going to be changes. Not changes that fit your desires but realistic changes, changes that wont fit you like a glove.
Changes that aren’t fair, because you wont get away with what you thought you would… after the end of the world.
These will be realistic changes: You might even say they are changes you can believe in.

Fernando “FerFAL” Aguirre