| How Can We Have Capitalism with No Capital? 
By Rep. Ron Paul
It
has been long understood that our federal government is going deeper into debt,
consistently raising the debt ceiling and demonstrating no fiscal restraint. In
recent years, debt ceiling increases have been placed in “must pass”
legislation as a means to guarantee that Republicans as well as Democrats would
vote for them when Congress was under Republican control.
We
also know our nation’s “negative savings rate” reflects the habits of private
citizens, showing those habits to be not tremendously different than the habits
of the public sector. Yet, the signs of decline are becoming ever more
apparent. So apparent, in fact, that it seems unlikely that bailouts or other
gimmicks will have even short term success. More inflation, and creating moral
hazard by bailing out egregious offenders, is a recipe for disaster. These
activities can seem to provide some short term relief, but it seems we are now
at a significant crisis point, where monetary policy gimmicks don’t provide the
band-aids they did in the past.
Not
only is our nation on the verge of bankruptcy, but so are its people and
private institutions. We are now repeatedly hearing about businesses “needing
to access the credit market to make payroll.” This is an unmistakable sign of
more dire consequences ahead for the economy. If businesses must borrow just to
make payroll, this is evidence of a severe undercapitalization that cannot be
sustained, even for the short run.
Couple
these facts with items such as the explosion of the “pay day loan” industry and
the unmasking of the false sense of economic well-being is nearly complete.
These pay day loan companies use preferred access to easy credit to inject cash
into the hands of the working poor. They are nearly always set up in
lower-income neighborhoods. These people, who are struggling to buy food and
pay rent, get addicted to the credit drug. Their standard of living is only
further depressed by the interest payments on these loans that make them
profitable to their providers. Thus, the recipients are left even less capable
of paying for items such as food and housing in the long run, without using
this credit again and again.
These
people are often the very ones being paid by businesses who “borrow to make
payroll.” This is the dark underbelly of the fiat money, borrow and spend
economy this nation has been building. As the government takes over more and
more functions of the economy many see the rise of socialism as an antidote to
this failure of “capitalism”. However, the fact remains that our economy has
been increasingly running on debt, not capital. Capitalism does not exist
without capital and debt is not, has never been and will never be a form of
capital. Only now are we seeing the more
dire implications of an economy without capital.
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(Issue
# 41,
October 13, 2008) |
