Post by RS Davis on Feb 24, 2004 20:03:38 GMT -5
[glow=red,2,300]Rep. Ron Paul, MD Wrote:[/glow]In testimony before the House Financial Services Committee two weeks ago, Federal Reserve Chairman Alan Greenspan painted a rosy picture of the U.S. economy. In his eyes, the Fed’s aggressive expansion of the money supply and suppression of interest rates have strengthened the financial condition of American households and industries. If this is true, however, our nation’s "prosperity" is merely a temporary illusion based on smoke and mirrors. True wealth cannot be created simply by printing money; families and businesses cannot prosper by getting deeper in debt.
In fact, Economist Frank Shostak of the Ludwig von Mises Institute throws cold water on Chairman Greenspan’s assertions in an article entitled "Running on Empty." Mr. Shostak cites statistics showing that American families have never been deeper in debt, never saved so little, and never consumed so much more than they produce. By any objective standard, U.S. families are treading on very shaky economic ground.
Never mind, says Mr. Greenspan. Mortgage refinancing, made wildly popular by artificially low interest rates established by the Fed, will be the saving grace of American households. They can simply borrow against their homes to finance living beyond their means, a practice encouraged by Fed policies. But what happens when home prices stop going up? What happens when families reach a point where they cannot make payments on two, three, or even more mortgages? How can the Fed chairman equate mortgage credit with real economic growth?
In fact, Economist Frank Shostak of the Ludwig von Mises Institute throws cold water on Chairman Greenspan’s assertions in an article entitled "Running on Empty." Mr. Shostak cites statistics showing that American families have never been deeper in debt, never saved so little, and never consumed so much more than they produce. By any objective standard, U.S. families are treading on very shaky economic ground.
Never mind, says Mr. Greenspan. Mortgage refinancing, made wildly popular by artificially low interest rates established by the Fed, will be the saving grace of American households. They can simply borrow against their homes to finance living beyond their means, a practice encouraged by Fed policies. But what happens when home prices stop going up? What happens when families reach a point where they cannot make payments on two, three, or even more mortgages? How can the Fed chairman equate mortgage credit with real economic growth?
- Rick
