The Inflation Reduction Act will do nothing; The U.S. economy's 'inevitable collapse' will come due to excessive debt - Ron Paul
Over the weekend, the Senate passed the Inflation Reduction Act, which aims to reduce inflation. The bill contains $430 billion in new spending, including $300 billion earmarked for climate change and clean energy.
The bill is now being sent to the House, where it is expected to pass, and on to President Biden’s desk for signing.
Despite being an ‘Inflation Reduction’ Act, the nonpartisan Congressional Budget Office (CBO) forecasts that the act’s measures will have a negligible impact on inflation. Democrats have argued that the bill will tackle rising prices, while Republicans argue that the new spending will aggravate inflation.
The bill also contains efforts to raise taxes, which the Congressional Budget Office predicts will end up lowering the deficit slightly.
For former Congressman Ron Paul, it is too little, too late.
“The only way [federal] debt is going to be liquidated, which is absolutely necessary over a period of time to get the market working again… is by inflation,” he said.
Paul, who represented Texas until 2013, said that he knew only four legislators, during his entire political tenure, who understood how markets work.
“The collapse will come… The debt has to be liquidated,” he said. “The preference I would have is [for the government] to quit spending. Balance the budget. Don’t accumulate any more debt. But politically, having spent a little bit of time in Washington, it’s not going to happen.”
Paul spoke with David Lin, Anchor and Producer at Kitco News.
The U.S. economy will collapse
According to the St. Louis Federal Reserve, the U.S. debt-to-GDP ratio is 125. Research by economists Ken Rogoff and Carmen Reinhart shows that when the debt-to-GDP level exceeds 90, an economy can slow down, and a debt crisis can occur.
For Ron Paul, the prognosis is more serious.
“I’m talking about the inevitable collapse of the economy, because we won’t be able to afford it, and that can come quickly,” he warned. “The debt is there, and we’re not going to pay it off in a normal, honorable, moral fashion. We are going to continue until the market wins.”
Paul added that “there has to be a default, and the default comes from paying off the bills with printed money,” which would lead to crippling inflation.
When it comes to timing of the collapse, Paul said that “we don’t know what the precipitating event will be.” He added that the resulting inflation would create a “political threat,” as inflation erodes the wealth of the middle class.
“With the middle class and the poor right now, the poor are out on the streets and the middle class can’t pay their bills,” he said. “It’s just starting.”
He emphasized that although there is a solution that would prevent such a crisis from occurring, it would be impossible to enact such a policy, since “politically, nobody will allow it… What they should do is quit spending money, bring all our troops home, give up on the welfare state, and turn us into a Republic.”
Rumblings in Taiwan?
When Ron Paul was in Congress, he was a well-known libertarian voice within the Republican Party, arguing against intervention in foreign conflicts.
U.S. House Speaker Nancy Pelosi recently took a trip to Taiwan, drawing the ire of nearby China, who holds that Taiwan is Chinese territory. Pelosi affirmed Taiwan’s independence during her visit.
“She was causing trouble,” said Paul. “Our policy of sending our ships and our planes and Nancy Pelosi over there just to aggravate the communists and the Chinese, it makes no sense.”
Paul favors good trade relations with China, rather than military tensions and hostilities.
“We should be interested in economic exchanges there,” he said. “How many billions of dollars has transpired between China and the United States? I have a strong believe that the [American] Founders were correct. The more you trade with a country, the less likely you are to fight with the country. So, we should be trading with [China]… I think it’s better to stay at home and mind one’s business and make sure you take care of civil liberties.”
To find out Ron Paul’s thoughts on the ongoing Russia-Ukraine conflict, watch the above video.
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