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Ron Paul Warns: The Coming American Bailout of the Euro

Written by Gary North on December 28, 2011

Ron Paul has issued a warning. The media are banging the bailout drum.

The economic establishment in this country has come to the conclusion that it is not a matter of “if” the United States must intervene in the bailout of the euro, but simply a question of “when” and “how”. Newspaper articles and editorials are full of assertions that the breakup of the euro would result in a worldwide depression, and that economic assistance to Europe is the only way to stave off this calamity. These assertions are yet again more scare-mongering, just as we witnessed during the depths of the 2008 financial crisis. After just a decade of the euro, people have forgotten that Europe functioned for centuries without a common currency.

The problem, as always, is central bank policy.

The real cause of economic depression is loose monetary policy: the creation of money and credit out of thin air and the monetization of government debt by a central bank. This inflationary monetary policy is the cause of every boom and bust, yet it is precisely what political and economic elites both in Europe and the United States are prescribing as a resolution for the present crisis. The drastic next step being discussed is a multi-trillion dollar bailout of Europe by the European Central Bank, aided by the IMF and the Federal Reserve.

The euro was a bureaucratic monster from the beginning. It is now falling apart, as centrally planned experiments do.

The euro was built on an unstable foundation. Its creators attempted to establish a dollar-like currency for Europe, while forgetting that it took nearly two centuries for the dollar to devolve from a defined unit of silver to a completely unbacked fiat currency note. The euro had no such history and from the outset was a purely fiat system, thus it is not surprising to followers of Austrian economics that it barely survived a decade and is now completely collapsing. Europe’s economic depression is the result of the euro’s very structure, a fiat money system that allowed member governments to spend themselves into oblivion and expect that someone else would pick up the tab.

But now Americans will be asked to pick up the tab.

A bailout of European banks by the European Central Bank and the Federal Reserve will exacerbate the crisis rather than alleviate it. What is needed is for bad debts to be liquidated. Banks that invested in sovereign debt need to take their losses rather than socializing those losses and prolonging the process of adjusting their balance sheets to reflect reality. If this was done, the correction would be painful, but quick, like tearing off a large band-aid, but this is necessary to get back on solid economic footing.  Until the correction takes place there can be no recovery. Bailing out profligate European governments will only ensure that no correction will take place.

A multi-trillion dollar European aid package cannot be undertaken by Europe alone, and will require IMF and Federal Reserve involvement. The Federal Reserve already has pumped trillions of dollars into the US economy with nothing to show for it. Just considering Fed involvement in Europe is ludicrous. The US economy is in horrible shape precisely because of too much government debt and too much money creation and the European economy is destined to flounder for the same reasons. We have an unsustainable amount of debt here at home; it is hardly fair to US taxpayers to take on Europe’s debt as well. That will only ensure an accelerated erosion of the dollar and a lower standard of living for all Americans.

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8 thoughts on “Ron Paul Warns: The Coming American Bailout of the Euro

  1. Bob Marshall says:

    While i consider a great patriot who would have had the approval of our founders he is talking to a group of millions of dumbed down and uninformed citizens who don't think. ' It is fortunate for the governments that the masses don't think." Adolf Hitler.

  2. Dick Morris "Ron Paul is to the LEFT of Obama

    Morris said something interesting in this video about Ron Paul suggesting the gold standard be used to regulate the American economy. He said that gold is mainly "mined in Africa and RUSSIA". Russia controls the gold? Then they will control the dollar and the American economy. This is why the End of the federal Reserve system would be a crippling effect on the Western nations and their ability to have any competitiveness in leveraging any source of supply from the BRIC nations who are the majority supplier of all Durable goods today internationally . The Western nations would be like Iceland was in the collapse of 2008 if we see a Gold standard return , this would be the end of the dollar as world trade currency and with it USA and European access to international supplies , and without a backup of supplies , we the people of the western civilizations would be SERFS Begging for Mercy from the BRIC Nations for supplies that we cannot produce anymore because we De-Industrialized our ability to do so !!!!

  3. Why is Ron Paul appeasing Iran when they are planning to destabilize the World Oil markets ??? here is what is coming our way , first this will cause world Oil Prices to collapse due to a unsustainable spike in prices that will force Obama to Nationalize the Energy Market in the USA and all other free market nations will follow . http://www.khaleejtimes.com/DisplayArticle11.asp?… , http://www.aljazeera.com/news/middleeast/2011/12/… , http://www.presstv.ir/detail/217961.html . Then this will happen as the dollar is rejected as world trade currency , http://email.theblaze.com/gb40/wmws/THBL/13250126… , here is what the Crackdown will look like in the USA when the Oil in the Middle east is Interrupted , Obama will be Licking his Chops !! http://www.infowars.com/government-censors-docume

  4. Why should our "bankrupt" country bail it out? I would say this is unbelievable if it weren't so like our "wimpy" Congress.

  5. I have heard no one that articulates my conservative views better than Rush Limbaugh. He is the only one on the scene that I would vote for without reservation. We need to insist that Rush runs for President. Does anyone else feel this way?

  6. If the US bails out Europe (Euro, and UK still has their currency, so won't be affected as adversely) the US will follow suit right down the tubes and into the sewer lines. I haven't heard anyone mention what will happen to the rest of the world, especially the Middle East, since they are dependent on selling their oil, and there won't be anyone to buy. When Europe and the US fall, Russia, China, and any economic company will roll down just like dominos.

  7. The United States is n no position to bail out anyone much less the extravagant European nations who have spent themselves into oblivion. Our soon to be 16 trillion dollar debt has placed us in a position of economic frailty and it would only take a small crisis to bring us over the edge to another depression. It almost occurred in 2008 but was narrowly averted by a tremendous spending spree that bailed out the banks and financial institutions who by their greed caused the near meltdown. American taxpayers simply will not tolerate another bailout especially for the European PIIGS nations.

  8. Myth Buster says:

    Ron Paul is an old man who should step away from the Republican fray. He is soon to become an embarrassment to himself and the Tea Party for his KKK style politics.