The cure is not to defeat deflation, the cure is to embrace deflation and stop fractional reserve lending and the serially bubble blowing activities of the Fed.
Ron Paul supports abolishing the Fed and the elimination of fractional reserve lending. Those are the only long term cures to the problems we face.
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What Is The Problem Today?
The problem is fractional reserve lending that allows banks to leverage lending 12-1 and broker dealers like the now defunct Bear Stearns and Lehman 40-1. It does not take much to cause a run on the bank when leverage is 40-1. Fannie Mae is leveraged many times more than that.
Without that excessive leverage, no one would be in trouble over falling prices. Actually, everyone would benefit. The cure is not to defeat deflation, the cure is to embrace deflation and stop fractional reserve lending and the serially bubble blowing activities of the Fed.
Ron Paul supports abolishing the Fed and the elimination of fractional reserve lending. Those are the only long term cures to the problems we face.
Deflation never has been and never will be a problem. It is the natural state of affairs and what one should expect as a result of rising productivity in the absence of wasteful spending practices by government.
Home prices need to drop to affordable levels, and they will regardless of how much money Congress wastes trying to stop prices from falling. Likewise, falling gasoline prices are a good thing. And paying down debt is a great thing.
Falling prices will allow debt to be paid back at a faster rate than rising prices. In a world of global wage arbitrage and wage pressures everywhere one looks, it is preposterous to think of falling prices as anything other than a blessing.
There is only one reason banks do not like deflation: they have lent out more money than they have, all betting on rising asset prices.
Regards,
Richard
Senior Vice President
Global Strategic Investments, LLC
305-357-5575 Phone
888-376-8738 Toll Free
305-373-8680 Fax
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