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1 Current Political Philosophies’ Errors to Result in Political and Economic Crisis.. There are easier roads to political success than using everyopportunity to speak on economic issues.

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PREFACE BY ROBERT P MURPHY

Pillars of Prosperity

FREEMARKETS, HONEST MONEY, PRIVATEPROPERTY

Ludwig von Mises Institute

AUBURN, ALABAMA

R ON P AUL

All rights reserved Written permission must be secured from the lisher to use or reproduce any part of this book, except for brief quota-tions in critical reviews or articles For information write: Ludwig vonMises Institute, 518 West Magnolia Avenue, Auburn, Alabama 36832;mises.org.

pub-Copyright 2008 © by the Ludwig von Mises Institute

ISBN: 978-1-933550-24-4

Contents

PREFACE BYROBERTP MURPHY XI

FOREWORD BYLLEWELLYNH ROCKWELL, JR XV

PART1—THEECONOMICS OF AFREESOCIETY 1

Current Political Philosophies’ Errors to Result in Political and Economic Crisis 3

Challenge to America: A Current Assessment of Our Republic 11

Has Capitalism Failed? 41

PART2—MISES ANDAUSTRIANECONOMICS: A PERSONALVIEW 47

PART3—REFORMINGSOCIALSECURITY 69

Senior Citizens’ Freedom to Work Act of 1999 71

Social Security Tax Relief Act 72

Social Security Preservation Act 74

Social Security for American Citizens Only! 75

PART4—GIVINGMONEYBACK TO THETAXPAYERS 77

The Agriculture Education Freedom Act 79

The Family Health Tax Cut Act 80

The Public Safety Tax Cut Act 82

End the Income Tax—Pass the Liberty Amendment 84

Teacher Tax Cut Act 85

The Family Education Freedom Act 86

The False Tax Cut Debate 89

Police Security Protection Act 91

PART5—MONEY ANDBANKING: GOLD VERSUSFIAT 93

To Provide for Amendment of the Bretton Woods Agreement Act, and for Other Purposes 95

Inflation—The Overriding Concern of All Americans 100

Curtailing the Discretionary Powers of the Federal Reserve 101

Print 3 Million and Take 1 Million for Yourself 103

Gold Prices Soar; Dollar Declines 104

Government Should Stop Destroying Value of the Dollar 105

Increased Money Supply Cause of Inflation 106

The Recent Strength of the Dollar and Inflation 107

Inflation is Caused by Government 108

Debasement 114

Congressional Inflation 115

Gold versus Paper 116

Five Myths of the Gold Standard 122

Audit of the Federal Reserve 128

High Interest Rates 132

At the Brink 133

The Folly of Current Monetary Policy 139

Back Into the Woods 140

Conduct of Monetary Policy, March 5, 1997 143

Federal Reserve has Monopoly over Money and Credit in United States 147

Conduct of Monetary Policy, July 22, 1997 167

East Asian Economic Conditions 175

Conduct of Monetary Policy, February 24, 1998 179

The Bubble 183

International Economic Turmoil 193

Revamping the Monetary System 197

Congress Ignores its Constitutional Responsibility Regarding Monetary Policy 200

Warning about Foreign Policy and Monetary Policy 202

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Economic Update 205

The Economy 212

The U.S Dollar and the World Economy 214

The Foolishness of Fiat 225

Gold and the Dollar 227

Hard Questions for Federal Reserve Chairman Greenspan 229

Bring Back Honest Money 232

Paper Money and Tyranny 235

Reject Taxpayer Bank Bailouts 256

The End of Dollar Hegemony 258

What the Price of Gold is Telling Us 269

Monetary Policy and the State of the Economy 283

Chinese Currency 286

Financial Services Paulson Hearing 288

PART6—FREETRADE: REAL VERSUSPHONY 291

Our Soaring Trade Deficit Cannot Be Ignored 293

Ron Paul Amendment to Cut Corporate Welfare 295

What is Free Trade? 303

The Dollar and Our Current Account Deficit 312

International Trade 315

PNTR 316

The Export-Import Reauthorization Act 319

Opposing Unconstitutional “Trade Promotion Authority” 321

Steel Protectionism 323

Export-Import Bank is Corporate Welfare 325

Don’t Antagonize Our Trading Partners 327

The United States Trade Rights Enforcement Act 329

PART7—INTERNATIONALAFFAIRS 331

Dissenting Views on H.R 7244 333

Big Bankers Get Their Bailout 337

The Mexican Bailout 338

Reaffirming Commitment of United States to Principles of the Marshall Plan 341

Calling for the United States to Withdraw from the World Trade Organization 343

U.S Membership in the World Trade Organization 346

New China Policy 348

Ending U.S Membership in the IMF 353

Wasteful Foreign Aid to Colombia 355

Opposing Taxpayer Funding of Multinational Development Banks 358

Why Does the IMF Prohibit Gold-Backed Currency for its Member States? 359

The Myth of War Prosperity 360

Opposing Trade Sanctions against Syria 362

Reject the Millennium Challenge Act 365

Providing for the Establishment of a Commission in the House of Representatives to Assist Parliaments in Emerging Democracies 368

Opposing Statement to Committee on Financial Services World Bank Hearing 369

Darfur Accountability and Divestment Act 370

Iran Sanctions Enabling Act 372

PART8—HOWGOVERNMENTDISTORTS THEHOUSINGMARKET 375

Debate on the Housing Opportunity and Responsibility Act of 1997 377

Fannie Mae and Freddie Mac Subsidies Distort the Housing Market 379

The American Dream Downpayment Act 381

Reforming the Government Sponsored Enterprises (Fannie Mae and Freddie Mac) 383

Mortgage Industry Has Its Roots in the Federal Reserve’s Inflationary Monetary Policy 388

viii Pillars of Prosperity

PART9—SPENDING, TAXES, ANDREGULATIONS 391

The Chrysler Bailout 393

The Balanced Budget Amendment 397

Authorizing President to Award Congressional Gold Medal to Mother Teresa 399

The Davis-Bacon Repeal Act 400

The National Right to Work Act 402

Authorizing President to Award Congressional Gold Medal to Rosa Parks 403

OSHA Home Office Regulations 404

Minimum Wage Increase Act 407

Awarding Gold Medal to Former President and Mrs Ronald Reagan in Recognition of Service to Nation 410

Internet Gambling Prohibition Act of 2000 411

The Wage Act 412

Truth in Employment Act 414

Financial Anti-Terrorism Act of 2001 415

Terrorism Reinsurance Legislation 416

The Collapse of Enron 419

Television Consumer Freedom Act 422

The Shrimp Importation Financing Fairness Act 424

Oppose the Federal Welfare State 426

Oppose the Spendthrift 2005 Federal Budget Resolution 430

A Token Attempt to Reduce Government Spending 432

Praising Private Space Exploration 435

Government Spending—A Tax on the Middle Class 436

Raising the Debt Limit: A Disgrace 440

Repeal Sarbanes-Oxley! 442

The Republication Congress Wastes Billions Overseas 444

So-Called “Deficit Reduction Act” 446

What Congress Can Do About Soaring Gas Prices 449

Executive Compensation 451

GLOSSARY OFACRONYMS 455

INDEX 459

x Pillars of Prosperity

Preface

Ron Paul is an amazing individual Not only has he been themost consistent voice for liberty in the U.S Congress in our time—

perhaps in all time—but he is also surprisingly well versed in

eco-nomic theory Indeed, if I were to dissect one of his speeches orarticles, I would have to treat him as I would a fellow economist,not as “a politician.”

On top of all that, Ron Paul is a successful OB-GYN, who ered over 4,000 babies during his career This is why I’m soamazed at his nuanced understanding of economics Let me put itthis way: Ron Paul knows a lot more about current accountdeficits than I do about giving a sonogram

deliv-We economists talk a lot about the division of labor, and

more-over we libertarians often invoke the concept to stir everyone to

action Sure, it’s important for the great thinkers like Ludwig vonMises and Murray Rothbard to come up with the grand ideas, butit’s also crucial for parents to teach their kids the virtue in hardwork, and for crotchety old men to write nasty Letters to the Edi-tor whenever the city council is considering a hike in propertytaxes

Now in the division of labor in the battle of ideas, is there a

place for someone in the U.S Congress?! I have to admit I wouldn’t

have thought so had you asked me five years ago But even thepurest of libertarians can’t deny that the Ron Paul movement isexciting, and is bringing the message of liberty to people who oth-erwise wouldn’t have heard it

The present collection seeks to give the reader a solid standing of Ron Paul’s views on various economic issues The core

under-of the book concerns Dr Paul’s strong support for honest money.(It was, after all, Nixon’s closing of the gold window thatprompted Dr Paul to run for office in the first place.) There arealso entire sections on trade, international organizations such asthe IMF and WTO, and a section outlining Dr Paul’s attempts toprotect Social Security from the big spenders in D.C The collectionalso includes a selection of specific tax cuts Dr Paul has suggested,which shows that—despite his nickname of “Dr No”—Ron Paul is

a real congressman, who brings real bills to the floor for ation

consider-Most of the selections are straight testimony from Dr Paul,though a few transcripts of actual floor debate have been included

to give the reader a feel for the deliberative body of which Paul is

a member There are numerous exchanges between Ron Paul andAlan Greenspan, as well as an encounter with George Soros thatsomehow turns to drug legalization And perhaps the most surrealevent is the duel between Ron Paul and Nancy Pelosi (over theconstitutionality of the Export-Import Bank)

Besides the eloquence and wisdom of his remarks, the reader

will also be struck by Ron Paul’s consistency over the decades This

makes perfect sense for someone who actually holds principlesand makes speeches accordingly But as we all know, this is rareindeed for a politician As an experiment, I had toyed with the idea

of combing through, say, Charles Rangel’s Congressional mony in five-year increments, to see if he were as consistent (in hisown way) as Ron Paul I quickly abandoned the plan, however,when I realized it would involve reading Charles Rangel’s Con-gressional testimony in five-year increments

testi-Unfortunately, the consistency of the speeches contained in thisbook is also somewhat depressing For example, now it’s down-right cute that Ron Paul (in 1982) was aghast that the federal debthad topped $1.1 trillion It would be one thing if no one saw ourcurrent financial mess coming, but plenty of people—especiallyRon Paul—did

On the other hand, we can take this as a sign of hope Thedetails are always shifting, but the basic problem remains thesame: Too much government interference with markets in general,

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and money in particular And the solution is the same: A truly freemarket in which the citizens’ property rights are respected by theirso-called public servants.

Robert P MurphyAdjunct ScholarLudwig von Mises Institute

September 30, 2007

Foreword

Congressman Ron Paul has been working for decades to bringeconomics to the forefront of political life In doing so, he hasraised topics that nearly everyone else in public life wants buried.But isn’t economics a dull topic, interesting only to Wall Streettraders and government bureaucrats? Isn’t it just about math andgraphs?

Not in Ron Paul’s view He has an intensity of passion for thediscipline of economics that follows up on what Ludwig von Misesbelieved Economics is the pith of material life It is the core body

of knowledge that seeks an explanation for all material ena as they are affected by human choice Economics is asunavoidable in politics as gravity is in the natural world It is aubiquitous reality whether we speak about it openly or not Therefore everyone should be interested in economics Thechoice we make about our economic system will determinewhether we rise or fall as a people, whether our families will thrive

phenom-or die, and whether the future itself has a future

The cause-and-effect relationship between bad policy and badeconomic outcomes, however, is not always obvious We needteachers and public intellectuals to point out the connectionsbetween the money supply and inflation, between regulations andslow growth, between protectionism and lowered living stan-dards, between public ownership and the decline of innovation The relationship is most clearly spelled out in the Austrian tra-dition represented by Carl Menger, Eugen von Böhm-Bawerk,Ludwig von Mises, F.A Hayek, Henry Hazlitt, Hans Sennholz,

and Murray Rothbard, for here we have a body of economic logicthat refines and improves classical doctrines to permit us to under-stand cause and effect in economic life Dr Paul has read theseauthors in detail, and learned from them He has gone further, in

a pioneering way, to apply them to political life In so doing, he hasearned for himself a high place in the annals of history

There are easier roads to political success than using everyopportunity to speak on economic issues Why did he choose thispath? Not merely to spread knowledge for its own sake Hebelieves that public awareness and knowledge is the key to estab-lishing and keeping freedom, which is the basis of civilizationitself Without a deep and abiding love of freedom in all spheres oflife, the government can ravage the human population But for apeople who love liberty, no power is strong enough to finally takeaway the right to pursue happiness

Others who came before Dr Paul in this respect are people likeCobden and Bright in England, Frédéric Bastiat in France, andThomas Jefferson in America All of them spoke the greatunspeakable truth that there are forces operating in the worldmore powerful than the whims of the political class Every effort atcentralized planning, and every attempt to legislate politicaldreams, bumps up against economic law Economics is the greatbrick wall, a thousand feet thick, that limits the maniacal dreams,benevolent or malevolent, of the political imagination We ignorethese economic forces at our peril

In Dr Paul’s view, if we seriously paid attention to the teaching

of economics, and the population understood those truths, the tral bank would be closed, the bureaucracies would be shut down,taxes would be repealed, spending programs would be abolished,and regulations would be stripped from the books—for all theseefforts to manage society not only fail to achieve their stated objec-tives; they also reduce our living standard and artificially restrictthe scope of freedom in our lives

cen-So there is a reason why politicians ignore the problem of nomics, and why they prefer to characterize it as a narrow fielddominated by number crunchers who care only tangentially aboutissues that impact the rest of society Instead, officials speakvagaries about leading the country into the future and meeting

eco-xvi Pillars of Prosperity

human needs because this sort of language empowers the politicalclass

I have no doubt that the contents of this book will make evensome of his supporters uncomfortable The right imagines that itsupports free enterprise, but even in the area of trade and money?Even to the point at which the state is denied permission to under-take tasks such as imposing sanctions on unfriendly foreignregimes? The left might like his antiwar positions, but what if giv-ing up war mongering also requires rethinking the merit of theredistributionist welfare state?

Dr Paul writes that freedom is all of a piece You can’t pick andchoose Moreover, it is impossible to speak of the future or ofhuman needs without trusting economic freedom and disempow-ering the state to intervene in every area of life Without soundmoney, there is no protection for savings and property, nor capitalaccumulation, nor long-term investment, nor entrepreneurship,nor social advance Without the right to own and control property,

we have no real say over our lives Without the freedom to makecontracts, to take risks, and to live in whatever peaceful way wechoose, there is no hope for the future

A state strong enough to redistribute wealth at a whim will nothesitate to wage war, impose sanctions, take away privacy, andviolate core human rights A state strong enough to wage war willnot think twice about redistributing wealth and running a cradle-to-grave welfare state These are truths that the right and left need

to deal with Nor are half-way measures a permanent fix RealSocial Security reform returns the financial responsibility for oldage to the institutions of a voluntary society Real reform in foreignpolicy means eliminating all restrictions on trade

We have to consider the courage it takes to speak this way intimes when the common belief is that the government can andshould do all things Ron Paul dares to ask us to rethink the waythe world works, to have confidence in the ability of society—meaning the millions of individuals of which it is constituted—tomanage itself He is uncompromising not because he is inflexible

or unthoughtful, but because he has vision and faith to see theunseen benefits of freedom and to ask us to do the same

In this volume are collected the wise statements from thenation’s leading teacher of free-market economic principles One is

struck by his consistency and willingness to state the truth, evenwhen it is unpopular to do so He is right to believe that the mostimportant step in this struggle is to state the truth, openly andwithout fear

In many ways, these speeches and essays amount to a chronicle

of incredible failure: for the state has failed in a million ways toprotect and defend our material well-being, and its very attempthas come at great cost

But it is also a chronicle of hope that if we are willing to listenand learn, we can choose a different future for ourselves, one thatremoves responsibility for economic well-being from the govern-ment and gives it back to those to whom it belongs: the people intheir capacity as living, choosing, creative human beings Nowthat is leadership, properly construed

Llewellyn H Rockwell, Jr.Ludwig von Mises Institute

December 2007

xviii Pillars of Prosperity

The Economics

of a Free Society

These selections lay out my views of the proper role of government, namely that it should serve only to protect the life and property of its cit- izens I respect the Constitution not because of a nostalgic attachment to

an anachronistic document, but because the Founders knew the danger in allowing government to overstep its legitimate functions It is unfortu- nate that many Americans today don’t understand the Founders’ wisdom

in framing our government on the principles of federalism and canism—as opposed to “democracy.” A free society can only work when its members agree that there are certain things left to the discretion of individuals—no matter what a temporary majority might think In prac- tice this means the government must respect private property and the rule of law, or what is also called free market capitalism.

republi-P ART O NE

Current Political Philosophies’ Errors to

Result in Political and Economic Crisis

Congressional Record—U.S House of Representatives

September 20, 1984

Mr Speaker, I have a deep concern for the direction in whichour country is going I have expressed this concern by pointing outthe political and economic contradictions that surround us andhave suggested that these contradictions merely are manifesta-tions of philosophic errors made by our intellectual leaders.Although the country currently is more or less in a euphoricmood, I am convinced the errors we are making today will even-tually result in a severe political and economic crisis

I don’t believe anyone precisely knows the future, yet we allmake projections as to our expectations It’s impossible to knowexact events and their timing but trends are known to us and cer-tain policies do have specific consequences Economically defin-able laws do exist and cannot be repealed For what it’s worth, Iwould like to make a few comments about what we can expect ifour current beliefs about governmentment’s role are not changed.The odds of a significant change in attitude occurring in Wash-ington in the near future are utterly remote Repealing the wel-fare-warfare state may be popular with a growing number of frus-trated American citizens, but that attitude is not yet reflected inWashington The constituency for the monolithic state is alive andwell in the U.S Congress When disagreement exists in areas such

as welfare versus warfare, the poor versus the rich, labor versus

3

business, compromise is always reached and both sides receive anincrease in funding This is a policy of utter folly and is tragicallylocked in place.

Government is literally out of control Spending, taxes, tions, monetary inflation, invasion of our privacy, welfarism toboth the rich and the poor, military spending, and foreign adven-turism around the world will one day precipitate a crisis that willtruly test our will to live in a free society If government were not

regula-so much out of control, would not the most conservative President

of the last 50 years be able to do something about the runawaydeficits? The deficits have tragically only gotten very much worseunder Reagan All the problems we face, high interest rates, infla-tion, deficits, vicious business cycles with accelerating unemploy-ment are serious problems indeed, but the real threat under theconditions to come will be the potential loss of our personal lib-erty Without liberty, prosperity is lost and equality of povertyprevails

We have a cancer in the land—the malignant growth of biggovernment—and we can ignore it, treating only the symptoms,hoping they are not reliable signs that a horrible disease has struckour nation But if we do, we are treating our problems as somefoolishly deny the early signs of cancer, by taking aspirin and hop-ing the pain to be only that of inconvenience and that the symp-toms will go away in the morning Instead, the pain gets worserequiring more and more narcotics to numb the pain Magic curesare sought and tried Although big government is the disease,attempts to solve all the problems by making government evenbigger and more intrusive in our lives are continually tried Thiswill soon end We cannot forever ignore the root causes It’s highlyunlikely that we’ll reach the 1990s without a convulsion of oureconomic or political system

Although nothing goes up or down in a straight line, we can besure the long term will bring us ever-increasing interest rates—higher with each cycle and over 20 percent before this cycle com-pletes itself in 1986 or 1987 Without the introduction of a com-modity money, one with quality—as well as limitation on its quan-tity—we will never see the return of long-term fixed low interestrates The reform will come eventually, if we’re to continue to haveeven a relatively free society I just hope we don’t wait too long

4 Pillars of Prosperity

Price inflation, although difficult to predict on a month or even year-to-year basis, will reach unbelievable heights inthis decade Currency destruction, through the insatiable desire tocreate massive new fiat monetary units, eventually brings higherprices Wage and price controls will return regardless of whether aRepublican or a Democrat occupies the White House Free marketrhetoric will do nothing to protect us from the pressure the admin-istration will receive to “do something,” even if it’s the wrongthing Nixonian Keynesianism will continue to dominate, and abu-sive people-control in the form of wage, price, currency and creditcontrols will return, more vicious than ever before.

month-to-There will come a day that the world financiers will rush fromdollars just as they have recently rushed into dollars, causing evenworse chaos in the international financial markets Without a sta-ble monetary unit, the speculation will continue and worsen.Overreaction is now becoming more commonplace, but this is apredictable consequence of a world gone mad with fiat currencies,debt creation, and overspending

Massive debt liquidation will come The early stages havealready started It will occur with old-fashioned defaults, threats ofdeflation, and further currency destruction through monetaryinflation and liquidation of debt with a depreciating dollar.Whether or not the liquidating debt collapse will be dominated bydeflation or inflation of the money supply is yet to be determinedsince that will depend on government actions and many marketforces An inflationary collapse is a more likely scenario—knowingthe special interests, the Congress, the administration, and the cen-tral bankers’ unwillingness to face up to the reality of cuttingspending, balancing the budget, and curtailing the supply ofmoney So in spite of all the tough talk, we can expect the Fed toaccommodate and reverse any trend toward deflation

Without a significant change in attitude by the American ple and Congress as to the purpose of government, the choices arehorrible; an inflationary collapse or a deflationary one The formand timing of the collapse is yet to be determined; the event itself

peo-is certain Thpeo-is crpeo-ispeo-is will come, as others have, because we refuse

to face up to reality and live within our means

The people’s insatiable appetite for the goods of life withoutproviding a commensurate amount of work and effort needed to

The Economics of a Free Society 5

produce them (while demanding that politicians deliver the loot)guarantees the process will continue But a penalty will have to bepaid That penalty—a major banking, currency, economic, andpolitical crisis—will hit this nation and the western world, mostlikely before the 1990s.

The economic hardship, of which we had a taste in 1981 and

1982, will be much worse That in itself is bad enough news, buthistorically, when a nation debauches its currency internationaltrade breaks down—today 40 percent of international trade is car-ried out through barter—protectionist sentiments rise—as theyhave in Congress already—eliciting hostile feelings with ourfriends Free trade alliances break down, breeding strong feelings

of nationalism—all conditions that traditionally lead to war; alikely scenario for the 1990s, unless our economic policies and atti-tudes regarding government are quickly changed

Many who concede we are moving in this direction of war, lessly believe that the lack of military spending is the problem andinsist on new massive military spending as the solution This onlyserves the inflationists, the internationalists, the banking elite, andindustrialists who benefit from the massive manufacture of militaryweapons It ignores the important fact that most military conflictsthroughout history have been the consequence of economic events.Economic events, when combined with a foreign policy void of wis-dom and fraught with folly, sets the stage for needless war

care-Conservatives are quick to correctly point out that guns don’tcause crime, criminals do, but fail to see that weapons, or the lack

of massive weapons, don’t cause war, politicians’ bad policies do.This is a good reason why the current conservative administrationshould have stopped subsidizing trade and foreign assistance tothe Soviet bloc nations and to Red China, which includes nuclearand military technology, instead of increasing it This is sheermadness

Massive military spending to stop the spread of communism,which our own taxpayers are also required to finance, contributes

to the economic problem of deficits, inflation, and high interestrates In addition it justifies, in the political world of compromise,increased domestic spending, higher deficits, accelerating inflationand higher interest rates—all compounding the economic prob-lems that started the trouble in the first place

6 Pillars of Prosperity